I found this article interesting in light of my own experiences with JP Morgan Chase, particularly them hiding terms of agreement by refusing to provide paperwork to document mortgage terms and insisting to only do business by telephone.
http://www.dailyfinance.com/story/company-news/chase-sec-whistleblower-complaint-credit-card/19768015/
Showing posts with label credit score. Show all posts
Showing posts with label credit score. Show all posts
Saturday, December 18, 2010
Sunday, December 13, 2009
Homeowners in Denial? Foreclosure Mediation Program needs to wake up!
An article in today's News Journal really got me mad. In it, Eric Ruth writes that homeowners don't access the Delaware Foreclosure Mediation program - which is designed to help homeowners facing foreclosure - because they are "in denial." Apparently officials who run the program believe the silly homeowners they want to help think they are ostriches - sticking their heads in the sand hoping the threat of losing their homes will go away if they do nothing.
Are they out of their minds? When will these policy makers look at the process instead of blaming the homeowners caught in the middle?
These programs demand homeowners have a perfect credit score to obtain assistance. Yet by the time your home is in foreclosure, your credit score is anything but perfect. One missed credit card payment made to pay your mortgage bill lands your credit score spiraling downward far below any levels that would allow you to take advantage of the program. Add to this the routine slight-of-hand tricks credit card issuers are using to push people into delinquency and the picture becomes even more dismal.
Rather than question why homeowners aren't taking advantage of this program, better to question what a credit score has to do with helping fighting home foreclosure. Rather than assume people with low credit scores aren't deserving of help or can't manage their funds, where is the thorough investigation of the banking industry, and the ways in which they force decent, hardworking, but struggling, individuals into foreclosure.
Homeowners in foreclosure aren't in denial. They are tired of being pawns in an endless game where the only winners are the banks determined to make all they can on kicking people out of their homes.
Link to Delaware Emergency Mortgage Assistance Program (DEMAP)
http://www.destatehousing.com/services/hb_demap.shtml
Are they out of their minds? When will these policy makers look at the process instead of blaming the homeowners caught in the middle?
These programs demand homeowners have a perfect credit score to obtain assistance. Yet by the time your home is in foreclosure, your credit score is anything but perfect. One missed credit card payment made to pay your mortgage bill lands your credit score spiraling downward far below any levels that would allow you to take advantage of the program. Add to this the routine slight-of-hand tricks credit card issuers are using to push people into delinquency and the picture becomes even more dismal.
Rather than question why homeowners aren't taking advantage of this program, better to question what a credit score has to do with helping fighting home foreclosure. Rather than assume people with low credit scores aren't deserving of help or can't manage their funds, where is the thorough investigation of the banking industry, and the ways in which they force decent, hardworking, but struggling, individuals into foreclosure.
Homeowners in foreclosure aren't in denial. They are tired of being pawns in an endless game where the only winners are the banks determined to make all they can on kicking people out of their homes.
Link to Delaware Emergency Mortgage Assistance Program (DEMAP)
http://www.destatehousing.com/services/hb_demap.shtml
Monday, November 9, 2009
Banks Launch Last Ditch Free-for-all
Before New Rules Kick In Next Year, Banks Take Last Opportunity to Gouge Customers with "Deceptive" Credit-Card Fees and Interest Rates
The nation's largest bank credit-card issuers are taking their last opportunity to gouge customers with inflated fees and interest rates before what the Federal Reserve has called "unfair and deceptive" tactics are officially outlawed in February 2010, according to a new report. The issuers, representing about 400 credit cards in the U.S., are reportedly hiking interest rates, penalties and fees "in full force" ahead of the new regulations.
The new report is from the Pew Health Group's Safe Credit Cards Project. "Until the law takes effect we're seeing that all the major credit-card issuers on the bank side are continuing to engage in these unfair and deceptive practices," said Nick Bourke, project manager of the Safe Credit Card Project, MarketWatch reports. "The numbers of unfair and deceptive practices have grown and in some cases are worse."
There's no question that the economic malaise and the millions of people without jobs has had a damaging effect on credit companies too. Credit-card charge-offs and delinquencies this year have doubled, even tripled in some cases, and are still hovering in record territory at the nation's largest banks with the outlook only worsening, reports MarketWatch writer Jennifer Waters. "Some of (those interest-rate and fee hikes) occurred because of the economic environment we're in," Bourke admitted. "But the timing is pegged at getting a lot of changes in before the bill takes effect."
Here's the article:
http://www.marketwatch.com/story/credit-cards-gouge-consumers-ahead-of-new-law-2009-11-06?siteid=rss&rss=1
The nation's largest bank credit-card issuers are taking their last opportunity to gouge customers with inflated fees and interest rates before what the Federal Reserve has called "unfair and deceptive" tactics are officially outlawed in February 2010, according to a new report. The issuers, representing about 400 credit cards in the U.S., are reportedly hiking interest rates, penalties and fees "in full force" ahead of the new regulations.
The new report is from the Pew Health Group's Safe Credit Cards Project. "Until the law takes effect we're seeing that all the major credit-card issuers on the bank side are continuing to engage in these unfair and deceptive practices," said Nick Bourke, project manager of the Safe Credit Card Project, MarketWatch reports. "The numbers of unfair and deceptive practices have grown and in some cases are worse."
There's no question that the economic malaise and the millions of people without jobs has had a damaging effect on credit companies too. Credit-card charge-offs and delinquencies this year have doubled, even tripled in some cases, and are still hovering in record territory at the nation's largest banks with the outlook only worsening, reports MarketWatch writer Jennifer Waters. "Some of (those interest-rate and fee hikes) occurred because of the economic environment we're in," Bourke admitted. "But the timing is pegged at getting a lot of changes in before the bill takes effect."
Here's the article:
http://www.marketwatch.com/story/credit-cards-gouge-consumers-ahead-of-new-law-2009-11-06?siteid=rss&rss=1
Tuesday, July 14, 2009
Clamping Down on Credit Card Companies
We can help fix the broken credit card industry. And I can sum up how in four words: Consumer Financial Protection Agency"
- Elizabeth Warren on the Rachel Maddow Show, MSNBC
The credit card industry is gearing up to fight real truth in lending guidelines being developed in an effort to clamp down on unsavory lending practices.
Among provisions being discussed? Credit agreements that people can read and that provide clear, concise detail on interest rates and what triggers a fee.
Interestingly enough I last week I received a notice from Bank of America informing me that the credit card I closed months ago was converting to a variable interest rate and there was nothing I could do about it....even though I closed the account a while ago because of its quadrupled minimum payment.
Other shady bank "tricks and traps":
a. Banks that refuse mortgage or other payments, citing returned checks, where returned simply means they sent your check back to you without ever presenting it to your bank for payment.
b. Banks that arbitrarily move payment due dates with little notice in effort to prompt a late payment.
c. Residual interest charges on payments made before the due date.
Here's an article from the New York Times about the effort to crack down on these shady practices and more.
June 17, 2009, 9:48 pm
Elizabeth Warren on Consumer Financial Protection
By Catherine Rampell
The new financial regulatory proposal released Wednesday by the White House would create a new consumer financial protection agency. It would have broad new authority to protect homeowners from unsuitable loans.
The idea is the brainchild of Elizabeth Warren, who is also reportedly being considered to head the new agency. Ms. Warren, a professor at Harvard Law School, is currently chairwoman of the Congressional Oversight Panel created to oversee the banking bailouts.
In addition to her academic research, Professor Warren has left a long record in the popular press on her own views about consumer debt and the government’s role in consumer financial protection — both on her blog, Credit Slips, and elsewhere. In recent years she has written relevant op-eds for The Chicago Tribune, The New York Times and The Boston Globe, among other publications. She has also done TV interviews about these ideas.
Most notably, she laid out the argument for a new agency in the journal Democracy in summer 2007. Presumably taking a cue from Ralph Nader, the essay was titled, “Unsafe at Any Rate.”
Some excerpts:
Consumers can enter the market to buy physical products confident that they won’t be tricked into buying exploding toasters and other unreasonably dangerous products.
They can concentrate their shopping efforts in other directions, helping to drive a competitive market that keeps costs low and encourages innovation in convenience, durability, and style. Consumers entering the market to buy financial products should enjoy the same protection. Just as the Consumer Product Safety Commission (CPSC) protects buyers of goods and supports a competitive market, we need the same for consumers of financial products — a new regulatory regime, and even a new regulatory body, to protect consumers who use credit cards, home mortgages, car loans, and a host of other products. The time has come to put scaremongering to rest and to recognize that regulation can often support and advance efficient and more dynamic markets.
She notes that not all of consumers’ credit problems can be wrung out of the system, given some consumers’ irresponsibility:
Indeed, there can be no doubt that some portion of the credit crisis in America is the result of foolishness and profligacy. Some people are in trouble with credit because they simply use too much of it. Others are in trouble because they use credit in dangerous ways. But that is not the whole story. Lenders have deliberately built tricks and traps into some credit products so they can ensnare families in a cycle of high-cost debt.
She argues that some consumers who do try to protect themselves often get taken advantage of by untrustworthy “experts,” whether in the mortgage market or at payday lending institutions:
Even worse, consumers wary of creditor tricks may look for help, only to rush headlong into the waiting arms of someone else who will fleece them – and then hand them over to the creditors for further fleecing.
She also describes problems she sees with the existing regulatory system, among them a “regulatory jumble” wherein consumer financial products (like subprime mortgages) “are regulated based, principally, on the identity of the issuer, rather than the nature of the product.”
She describes what her ideal consumer financial product safety commission (F.P.S.C.) would do:
Like its counterpart for ordinary consumer products, this agency would be charged with responsibility to establish guidelines for consumer disclosure, collect and report data about the uses of different financial products, review new financial products for safety, and require modification of dangerous products before they can be marketed to the public. The agency could review mortgages, credit cards, car loans, and a number of other financial products, such as life insurance and annuity contracts. In effect, the F.P.S.C. would evaluate these products to eliminate the hidden tricks and traps that make some of them far more dangerous than others.
An F.P.S.C. would promote the benefits of free markets by assuring that consumers can enter credit markets with confidence that the products they purchase meet minimum safety standards.
She also responds to anticipated arguments that such an agency might over-reach, over-regulate or at the very least regulate poorly:
With every agency, the fear of regulatory capture is ever-present. But in a world in which there is little coherent, consumer-oriented regulation of any kind, an F.P.S.C. with power to act is far better than the available alternatives.
While Professor Warren acknowledges that consumers can still do stupid things and get themselves into trouble, in the end, of course, she concludes that a new agency and/or regulatory structure aimed at safeguarding consumer interests would “eliminate some of the most egregious tricks and traps in the credit industry.”
Not surprisingly, the financial services industry has pushed back against many of Professor Warren’s ideas about consumer protection.
- Elizabeth Warren on the Rachel Maddow Show, MSNBC
The credit card industry is gearing up to fight real truth in lending guidelines being developed in an effort to clamp down on unsavory lending practices.
Among provisions being discussed? Credit agreements that people can read and that provide clear, concise detail on interest rates and what triggers a fee.
Interestingly enough I last week I received a notice from Bank of America informing me that the credit card I closed months ago was converting to a variable interest rate and there was nothing I could do about it....even though I closed the account a while ago because of its quadrupled minimum payment.
Other shady bank "tricks and traps":
a. Banks that refuse mortgage or other payments, citing returned checks, where returned simply means they sent your check back to you without ever presenting it to your bank for payment.
b. Banks that arbitrarily move payment due dates with little notice in effort to prompt a late payment.
c. Residual interest charges on payments made before the due date.
Here's an article from the New York Times about the effort to crack down on these shady practices and more.
June 17, 2009, 9:48 pm
Elizabeth Warren on Consumer Financial Protection
By Catherine Rampell
The new financial regulatory proposal released Wednesday by the White House would create a new consumer financial protection agency. It would have broad new authority to protect homeowners from unsuitable loans.
The idea is the brainchild of Elizabeth Warren, who is also reportedly being considered to head the new agency. Ms. Warren, a professor at Harvard Law School, is currently chairwoman of the Congressional Oversight Panel created to oversee the banking bailouts.
In addition to her academic research, Professor Warren has left a long record in the popular press on her own views about consumer debt and the government’s role in consumer financial protection — both on her blog, Credit Slips, and elsewhere. In recent years she has written relevant op-eds for The Chicago Tribune, The New York Times and The Boston Globe, among other publications. She has also done TV interviews about these ideas.
Most notably, she laid out the argument for a new agency in the journal Democracy in summer 2007. Presumably taking a cue from Ralph Nader, the essay was titled, “Unsafe at Any Rate.”
Some excerpts:
Consumers can enter the market to buy physical products confident that they won’t be tricked into buying exploding toasters and other unreasonably dangerous products.
They can concentrate their shopping efforts in other directions, helping to drive a competitive market that keeps costs low and encourages innovation in convenience, durability, and style. Consumers entering the market to buy financial products should enjoy the same protection. Just as the Consumer Product Safety Commission (CPSC) protects buyers of goods and supports a competitive market, we need the same for consumers of financial products — a new regulatory regime, and even a new regulatory body, to protect consumers who use credit cards, home mortgages, car loans, and a host of other products. The time has come to put scaremongering to rest and to recognize that regulation can often support and advance efficient and more dynamic markets.
She notes that not all of consumers’ credit problems can be wrung out of the system, given some consumers’ irresponsibility:
Indeed, there can be no doubt that some portion of the credit crisis in America is the result of foolishness and profligacy. Some people are in trouble with credit because they simply use too much of it. Others are in trouble because they use credit in dangerous ways. But that is not the whole story. Lenders have deliberately built tricks and traps into some credit products so they can ensnare families in a cycle of high-cost debt.
She argues that some consumers who do try to protect themselves often get taken advantage of by untrustworthy “experts,” whether in the mortgage market or at payday lending institutions:
Even worse, consumers wary of creditor tricks may look for help, only to rush headlong into the waiting arms of someone else who will fleece them – and then hand them over to the creditors for further fleecing.
She also describes problems she sees with the existing regulatory system, among them a “regulatory jumble” wherein consumer financial products (like subprime mortgages) “are regulated based, principally, on the identity of the issuer, rather than the nature of the product.”
She describes what her ideal consumer financial product safety commission (F.P.S.C.) would do:
Like its counterpart for ordinary consumer products, this agency would be charged with responsibility to establish guidelines for consumer disclosure, collect and report data about the uses of different financial products, review new financial products for safety, and require modification of dangerous products before they can be marketed to the public. The agency could review mortgages, credit cards, car loans, and a number of other financial products, such as life insurance and annuity contracts. In effect, the F.P.S.C. would evaluate these products to eliminate the hidden tricks and traps that make some of them far more dangerous than others.
An F.P.S.C. would promote the benefits of free markets by assuring that consumers can enter credit markets with confidence that the products they purchase meet minimum safety standards.
She also responds to anticipated arguments that such an agency might over-reach, over-regulate or at the very least regulate poorly:
With every agency, the fear of regulatory capture is ever-present. But in a world in which there is little coherent, consumer-oriented regulation of any kind, an F.P.S.C. with power to act is far better than the available alternatives.
While Professor Warren acknowledges that consumers can still do stupid things and get themselves into trouble, in the end, of course, she concludes that a new agency and/or regulatory structure aimed at safeguarding consumer interests would “eliminate some of the most egregious tricks and traps in the credit industry.”
Not surprisingly, the financial services industry has pushed back against many of Professor Warren’s ideas about consumer protection.
Thursday, May 21, 2009
What the New Credit Card Change Could Mean to You
Personally I think the "late payment" provisions of this legislation need to be made clearer. Some of the concerns raised in my previous credit card post, about companies arbitrarily moving payment due dates, have been addressed.
In theory, it looks like the concept of grace periods have been re-established, but to say payment must be due "21 days after mailing" seems strange.
There also needs to be some consistency about what constitutes being "30-days delinquent." Suppose I charge something on the 1st, the day before my statement cycles. I get a statement the following week with a payment due date of the end of the month. If miss that payment, am I really 30 days delinquent?
Yes, according to Bank of America, which holds my FIA card services credit card. For the record, overnight FIA recently nearly doubled my monthly payment, changing it from normally ranging around $125 to a whopping $250 a month. While they were at it they also increased my interest rate to 28 percent.
When I asked why, they claimed there was something "strange" in my credit profile. Knowing that not to be true, I challenged that assessment, they later claimed made a late payment -- a payment received after the due date. They failed to mention that yes, I missed the due date, but I also paid off the balance. My pay off check arrived a day or so after the due date. The next month, I used the card again.
For me the fundamental principle of offering credit cards with hopes they go into default should be outlawed. To design cards in a way that rewards looking for creative ways to make consumers delinquent is not only unfair but should be unethical. I don't care that card companies make money on getting investors to buy their credit portfolios.
Still checking for a list of congressmen who voted "no" on the house version of this bill.
Wednesday, May 13, 2009
The Mortgage Crisis: Where's Carper when you need him?
I'm really disappointed with Senator Carper's vote on this one. A judge should be able to distinguish whether a case involves fraud or not. Punishing everyone for the indiscretion of a few makes no sense at all.If you are disappointed too, pick up the phone and call his office at 202-224-2441.
US Senate defeats mortgage relief measure
http://news.yahoo.com/s/afp/20090430/pl_afp/useconomyhousingpoliticscongress
WASHINGTON (AFP) – The US Senate on Thursday defeated a measure that could have helped millions of Americans avoid foreclosure by letting bankruptcy judges cut their mortgage payments.
The White House-backed proposal, an amendment to another bill, fell in a 51-45 vote that failed to reach the 60-vote threshold needed to ensure passage.
The legislation, popularly known as the "cram-down" bill, drew fire from the banking industry and from Republicans who alleged that it lacked safeguards to prevent borrowers who used bad judgement or outright fraud from benefiting.
Assistant Democratic Senate Majority Leader Dick Durbin, the measure's chief champion, expressed disappointment at the result but voted to push the issue "until the Senate decides to put the interests of homeowners above the interests of bankers."
"We?ve given the bankers who got us into this crisis every opportunity to responsibly address this crisis and they have failed. I?ll keep working to give homeowners every legal means to save their homes," said Durbin.
Durbin said more than eight million homeowners were at risk for foreclosure.
The US House of Representatives had approved its version of the legislation by a 234-191 margin on March 5.
US Senate defeats mortgage relief measure
http://news.yahoo.com/s/afp/20090430/pl_afp/useconomyhousingpoliticscongress
WASHINGTON (AFP) – The US Senate on Thursday defeated a measure that could have helped millions of Americans avoid foreclosure by letting bankruptcy judges cut their mortgage payments.
The White House-backed proposal, an amendment to another bill, fell in a 51-45 vote that failed to reach the 60-vote threshold needed to ensure passage.
The legislation, popularly known as the "cram-down" bill, drew fire from the banking industry and from Republicans who alleged that it lacked safeguards to prevent borrowers who used bad judgement or outright fraud from benefiting.
Assistant Democratic Senate Majority Leader Dick Durbin, the measure's chief champion, expressed disappointment at the result but voted to push the issue "until the Senate decides to put the interests of homeowners above the interests of bankers."
"We?ve given the bankers who got us into this crisis every opportunity to responsibly address this crisis and they have failed. I?ll keep working to give homeowners every legal means to save their homes," said Durbin.
Durbin said more than eight million homeowners were at risk for foreclosure.
The US House of Representatives had approved its version of the legislation by a 234-191 margin on March 5.
Sunday, December 28, 2008
Who is Fair Issac? And why are they given free reign to destroy lives?
Everyone blames their own culprit for the current credit crisis. Banks blame “risky borrowers.” Borrowers blame “greedy lenders.” News pundants offer their "expert analysis." Guess-accusations disguised as fact gets bandied about on the early morning news show coffee klatches.
Let’s face it. Banks are out of control. But few are looking at the unregulated source that determines who is credit worthy and who is not.
That distinction belongs to Fair Issac, the shadowy giant responsible for divvying out FICO credit scores.
Personally I think there is something sinister about FICO scores and the company that issues them. Here’s why.
To be honest, one reason is I’m baffled why a friend who declared bankruptcy has a better FICO score than mine. Rather than declare bankruptcy, I decided to pay off my creditors instead. Isn’t that what banks want, people who pay their debts? Apparently not, according to our scores.
I noticed the discrepancy right away. Although we opened accounts at the same bank with the same opening deposit amount, she was given overdraft protection and a host of other perks and I “didn’t qualify.” That was ten years ago.
Today, I make triple her income. I’ve never defaulted on a loan; never declared bankruptcy. I’ve never had my telephone service, cable, gas or electric disconnected. I’ve bought at least five cars over my lifetime, had numerous personal bank loans, and paid thousands over time for electronics equipment, furniture, two houses and more -- all paid as agreed. Yet she regularly gets offers for credit card offers in excess of 20-, 30- or more thousand dollars. If I get one offering me a mere thousand, I’m lucky. Why?
Only Fair Issac knows for sure. Even when I pay my credit balances down to zero, they find reasons to keep my score low.
To FICO I’m a credit risk. To make things worse, the three major credit bureaus can also find unfathomable reasons not to fix erroneous credit reports, even though the experts say that’s illegal.
Banks too, seem to have a vested interest in not fixing errors, all the while blaming “risky” borrowers for problems clearly of the banks’ own doing.
I’d like to be at the head of the line of consumers championing a thorough investigation of the banking industry, especially, Fair Issac, the FICO folks. Fact is, many borrowers who thought they’d be able to refinance their mortgages when their “risky” credit scores got better found themselves stuck when those scores didn’t rise as they expected. Their once single digit mortgage interest rates more than doubled. Suddenly a once fairly reasonable 5 or 6 percent interest loan ballooned to 10, 15 and even 28 percent. Payments soared and the ability to pay them fell out of reach for many. Fast forward to mortgage industry melt-down.
My "risky credit" experience goes like this. Several years ago Citibank unceremoniously charged off my Visa account, even though I was paying on it monthly, in amounts above and beyond what was agreed. How can that be?
Through a series of unforeseen circumstances -- namely I was laid off -- I fell behind in my Visa payments. As advised by the so-experts, I called Citibank and notified them of the situation. I made payment arrangements to get caught up again--thinking it was the responsible thing to do.
Citibank promised they would ‘recycle’ my account current if I agreed to pay $48 dollars a month for four consecutive months. I agreed, and in addition to paying the amount promised, I paid them an extra $60 each month since I found a new job. In the final month of our “agreement” I made a lump sum payment of over a thousand dollars -- paying half of the entire outstanding balance. I also sent them a letter notifying them I’d pay the remainder of the balance in full the next month.
My reward for all of this due diligence? My account was charged off and sent to a collection agency for non-payment. Huh?
The only reason I can figure is, for some reason, my checks always seemed to arrive at Citibank a couple days after the due date, no matter when I mailed them.
I refused to negotiate with the collection agency – okay maybe that was my fault, I agree. Instead I kept my promise and mailed the full payoff amount directly to Citibank. They never cashed the money order.
I discovered that more than a year later, when the charge off was still showing up on my credit bureau report. Luckily I still had the receipt of my payment. I went back to the place I purchased the money order, verified it had never been cashed, then resent the money directly to Citibank and moved forward.
That same year for some reason unknown to me, the IRS decided to put a lien on my house for unpaid taxes…taxes that were already paid both by me and my employer. Rather than pay the disputed amount immediately, I sent proof that the taxes had already been paid by my employer. By the time I got that error straightened out with the IRS, several months had gone by. After realizing the mistake, the IRS subsequently removed the lien. The credit bureau didn’t.
Now back to FICO. To FICO, it doesn’t matter that Citibank decided not to cash my money order or that they charged off my account even though I was paying them exactly what I was asked.
Both the charge off and the lien, of course, showed up on my credit report. On review, I also discovered something on my report I knew nothing about…a charged-off amount of $30 for a cable account I never had. I suddenly realized that a tenant had subscribed to cable service in my name.
Interestingly enough, that tenant subsequently paid the amount in full a few weeks after they had fallen behind. Yet, the time during which they fell behind was showing up on my credit report.
I contacted the company immediately with proof I had never opened the account, never used their service and didn’t owe them a dime. When the company refused to correct the item I also contacted the Better Business Bureau.
I notified all three credit bureaus - Equifax, Experian and Trans-union – about each of the situations above -- repeatedly. I sent proof of the release of the lien, with a copy of the letters from the IRS. I sent statement copies, letters, money order copies and more detailing my dispute with Citibank. I showed proof that I never signed up for cable, and was out of the country when the order was placed.
To date, the fictitious cable account still appears on my credit report. So does the lien, even though I have repeatedly sent copies of the letter from the IRS removing it. So does Citibank, although it shows up as a “paid” charge off.
Every time I contact the credit bureaus to correct the information, I get the runaround. Experian even sent me a letter claiming that although the erroneous cable charge would remain on my report, because of my “request,” they would put a fraud alert on my credit file. Never-mind that I never asked for a fraud alert to be placed on my file or that the cable account in question was closed years ago.
That brings me to today. Recently I discovered a store-card account was 60 days past due. I’ve had the account since I was in college. I turn 51 this week. For some reason the company says I opened the account in 1996, even though I have statements dating back to the 80s (and copies of payment checks dating back into the 70s).
In all the years I’ve had the account it has always had a grace period. Suddenly, as of June, it doesn’t. And now since I consistently paid my bill a few days after the due date, on the 19th instead of the 14th -- like I’ve been doing for more than 20 years -- it’s now seriously delinquent. Huh?
Okay, so I didn’t read the change in terms I got in the mail. If you can read those things and understand them, you’re a better person than me – and I worked in the credit card industry for almost a decade.
I paid the past due amounts, and may now close the account. Meanwhile, my "always pay-on-time-because-of-overdraft-protection" friend who simply declared bankruptcy when she got behind on her debt has a perfect FICO score, while mine hovers somewhere around 400.
What goes into a FICO score? If this number is used to determine every financial aspect of our lives, we should know more about what drives it and what doesn’t.
Isn’t it all completely subjective guesswork, versus being based on scientific evidence? How do we know profiling isn’t part of the equation? Because Fair Issac says so? The potential for abuse here is beyond measure -- just ask those guys in the “free-credit-score-dot-com” commercials.
Come to think of it, why do I have to pay to view something that controls my very livelihood? Why should I pay an annual fee to view something that can determine if I work or not and in some cases, where I can live? Why is it that someone who completely writes off his or her debt can be viewed as more responsible than those of us to work to pay our debts off, albeit slowly and maybe not perfectly? And if a creditor makes a mistake, why do I have to pay for it with a poor credit score?
To me, it seems FICO scores determine who has ready access to excess cash, rather than who is or is not "risky." People who have overdraft protection that covers their checks, regardless of whether or not they actually have the available funds, can always pay on time. They don't have to give a thought to whether or not those funds are currently in their checking accounts when they pay a bill. Additionally people with extraordinarily high credit lines can afford to charge hefty fines, like taxes, and pay them on time, even if if they are incorrect. They can pay them up front, while waiting for disputes to be resolved and the charges reimbursed.
So, risk isn't about who pays or who doesn't. It's about who has ready access to money, and who doesn't. Apparently it's better not to pay your bills at all than to be a few days late doing it.
On television recently I saw a bank commercial that offered a simple solution to fix the current credit crisis: don’t lend to risky borrowers. I have a better fix: let’s do some prying into what makes Fair Issac tick, and why some borrowers are deemed “risky” and others not.
Let’s face it. Banks are out of control. But few are looking at the unregulated source that determines who is credit worthy and who is not.
That distinction belongs to Fair Issac, the shadowy giant responsible for divvying out FICO credit scores.
Personally I think there is something sinister about FICO scores and the company that issues them. Here’s why.
To be honest, one reason is I’m baffled why a friend who declared bankruptcy has a better FICO score than mine. Rather than declare bankruptcy, I decided to pay off my creditors instead. Isn’t that what banks want, people who pay their debts? Apparently not, according to our scores.
I noticed the discrepancy right away. Although we opened accounts at the same bank with the same opening deposit amount, she was given overdraft protection and a host of other perks and I “didn’t qualify.” That was ten years ago.
Today, I make triple her income. I’ve never defaulted on a loan; never declared bankruptcy. I’ve never had my telephone service, cable, gas or electric disconnected. I’ve bought at least five cars over my lifetime, had numerous personal bank loans, and paid thousands over time for electronics equipment, furniture, two houses and more -- all paid as agreed. Yet she regularly gets offers for credit card offers in excess of 20-, 30- or more thousand dollars. If I get one offering me a mere thousand, I’m lucky. Why?
Only Fair Issac knows for sure. Even when I pay my credit balances down to zero, they find reasons to keep my score low.
To FICO I’m a credit risk. To make things worse, the three major credit bureaus can also find unfathomable reasons not to fix erroneous credit reports, even though the experts say that’s illegal.
Banks too, seem to have a vested interest in not fixing errors, all the while blaming “risky” borrowers for problems clearly of the banks’ own doing.
I’d like to be at the head of the line of consumers championing a thorough investigation of the banking industry, especially, Fair Issac, the FICO folks. Fact is, many borrowers who thought they’d be able to refinance their mortgages when their “risky” credit scores got better found themselves stuck when those scores didn’t rise as they expected. Their once single digit mortgage interest rates more than doubled. Suddenly a once fairly reasonable 5 or 6 percent interest loan ballooned to 10, 15 and even 28 percent. Payments soared and the ability to pay them fell out of reach for many. Fast forward to mortgage industry melt-down.
My "risky credit" experience goes like this. Several years ago Citibank unceremoniously charged off my Visa account, even though I was paying on it monthly, in amounts above and beyond what was agreed. How can that be?
Through a series of unforeseen circumstances -- namely I was laid off -- I fell behind in my Visa payments. As advised by the so-experts, I called Citibank and notified them of the situation. I made payment arrangements to get caught up again--thinking it was the responsible thing to do.
Citibank promised they would ‘recycle’ my account current if I agreed to pay $48 dollars a month for four consecutive months. I agreed, and in addition to paying the amount promised, I paid them an extra $60 each month since I found a new job. In the final month of our “agreement” I made a lump sum payment of over a thousand dollars -- paying half of the entire outstanding balance. I also sent them a letter notifying them I’d pay the remainder of the balance in full the next month.
My reward for all of this due diligence? My account was charged off and sent to a collection agency for non-payment. Huh?
The only reason I can figure is, for some reason, my checks always seemed to arrive at Citibank a couple days after the due date, no matter when I mailed them.
I refused to negotiate with the collection agency – okay maybe that was my fault, I agree. Instead I kept my promise and mailed the full payoff amount directly to Citibank. They never cashed the money order.
I discovered that more than a year later, when the charge off was still showing up on my credit bureau report. Luckily I still had the receipt of my payment. I went back to the place I purchased the money order, verified it had never been cashed, then resent the money directly to Citibank and moved forward.
That same year for some reason unknown to me, the IRS decided to put a lien on my house for unpaid taxes…taxes that were already paid both by me and my employer. Rather than pay the disputed amount immediately, I sent proof that the taxes had already been paid by my employer. By the time I got that error straightened out with the IRS, several months had gone by. After realizing the mistake, the IRS subsequently removed the lien. The credit bureau didn’t.
Now back to FICO. To FICO, it doesn’t matter that Citibank decided not to cash my money order or that they charged off my account even though I was paying them exactly what I was asked.
Both the charge off and the lien, of course, showed up on my credit report. On review, I also discovered something on my report I knew nothing about…a charged-off amount of $30 for a cable account I never had. I suddenly realized that a tenant had subscribed to cable service in my name.
Interestingly enough, that tenant subsequently paid the amount in full a few weeks after they had fallen behind. Yet, the time during which they fell behind was showing up on my credit report.
I contacted the company immediately with proof I had never opened the account, never used their service and didn’t owe them a dime. When the company refused to correct the item I also contacted the Better Business Bureau.
I notified all three credit bureaus - Equifax, Experian and Trans-union – about each of the situations above -- repeatedly. I sent proof of the release of the lien, with a copy of the letters from the IRS. I sent statement copies, letters, money order copies and more detailing my dispute with Citibank. I showed proof that I never signed up for cable, and was out of the country when the order was placed.
To date, the fictitious cable account still appears on my credit report. So does the lien, even though I have repeatedly sent copies of the letter from the IRS removing it. So does Citibank, although it shows up as a “paid” charge off.
Every time I contact the credit bureaus to correct the information, I get the runaround. Experian even sent me a letter claiming that although the erroneous cable charge would remain on my report, because of my “request,” they would put a fraud alert on my credit file. Never-mind that I never asked for a fraud alert to be placed on my file or that the cable account in question was closed years ago.
That brings me to today. Recently I discovered a store-card account was 60 days past due. I’ve had the account since I was in college. I turn 51 this week. For some reason the company says I opened the account in 1996, even though I have statements dating back to the 80s (and copies of payment checks dating back into the 70s).
In all the years I’ve had the account it has always had a grace period. Suddenly, as of June, it doesn’t. And now since I consistently paid my bill a few days after the due date, on the 19th instead of the 14th -- like I’ve been doing for more than 20 years -- it’s now seriously delinquent. Huh?
Okay, so I didn’t read the change in terms I got in the mail. If you can read those things and understand them, you’re a better person than me – and I worked in the credit card industry for almost a decade.
I paid the past due amounts, and may now close the account. Meanwhile, my "always pay-on-time-because-of-overdraft-protection" friend who simply declared bankruptcy when she got behind on her debt has a perfect FICO score, while mine hovers somewhere around 400.
What goes into a FICO score? If this number is used to determine every financial aspect of our lives, we should know more about what drives it and what doesn’t.
Isn’t it all completely subjective guesswork, versus being based on scientific evidence? How do we know profiling isn’t part of the equation? Because Fair Issac says so? The potential for abuse here is beyond measure -- just ask those guys in the “free-credit-score-dot-com” commercials.
Come to think of it, why do I have to pay to view something that controls my very livelihood? Why should I pay an annual fee to view something that can determine if I work or not and in some cases, where I can live? Why is it that someone who completely writes off his or her debt can be viewed as more responsible than those of us to work to pay our debts off, albeit slowly and maybe not perfectly? And if a creditor makes a mistake, why do I have to pay for it with a poor credit score?
To me, it seems FICO scores determine who has ready access to excess cash, rather than who is or is not "risky." People who have overdraft protection that covers their checks, regardless of whether or not they actually have the available funds, can always pay on time. They don't have to give a thought to whether or not those funds are currently in their checking accounts when they pay a bill. Additionally people with extraordinarily high credit lines can afford to charge hefty fines, like taxes, and pay them on time, even if if they are incorrect. They can pay them up front, while waiting for disputes to be resolved and the charges reimbursed.
So, risk isn't about who pays or who doesn't. It's about who has ready access to money, and who doesn't. Apparently it's better not to pay your bills at all than to be a few days late doing it.
On television recently I saw a bank commercial that offered a simple solution to fix the current credit crisis: don’t lend to risky borrowers. I have a better fix: let’s do some prying into what makes Fair Issac tick, and why some borrowers are deemed “risky” and others not.
Friday, November 9, 2007
Credit Scores: Guilty Before Proven Innocent
Imagine. A straight “A” student with a stellar performance record in and outside of the classroom applies to college -- and gets rejected. Why? Because she’s African American and statistics show blacks tend to fairly poorly in college. Outrageous?
Not according to the auto insurance industry, which would have us believe people are guilty despite documented evidence of their innocence. Their rationale? Low numbers on a credit score.
Charging drivers higher insurance premiums -- for no reason other than a spotty credit history -- is not only unfair, but also immoral. Why should I, with zero moving violations against my record, and no accidents or other claims filed in more than 20 years, pay for my neighbors’ carelessness and aggressive driving – simply because his credit is better than mine?
The car insurance/credit score debate in Delaware opens a Pandora’s Box about issues surrounding the finance industry. I’ve personally spent hours, days, even months cleaning up factual errors in my own report. Fixing reporting errors and fighting the three credit bureaus alone could be a full time job.
To point out just how troubling the trend, I personally know several fine and otherwise upstanding people who suddenly find themselves in a chokehold because of credit score errors and the horrors of trying to fix them.
To be honest, I’m still baffled at why a friend who wrote of all her debt and declared bankruptcy has a better score than mine, when I decided to pay off my creditors instead. Isn’t that what banks what? People who pay their debts? Apparently not according to our scores.
And just what does any of this have to do with driving? My same friend has filed several car insurance claims in the ten years I’ve known her. I haven’t had one. She lives in a relatively high crime area. I don’t. But my insurance rates should be higher?
The insurance industry’s own arguments for the practice are the most troubling. “The score can’t predict accidents,” admits Jeff Junkas, a spokesperson for the association that represents insurance companies nationwide. “They only indicate the likelihood of a claim,” he explains.
When pushed about the fairness of the practice: “We don’t know why it works, but it does work,” he quips, as if the ends really justify the means.
Using his argument, we should charge women in the workplace higher health insurance premiums. Why? While we can’t predict they’ll get pregnant, we do know there’s a likelihood sometime during their career they’ll have kids. Consequently they will strain health benefits they’ll not only need prenatal care but also expect maternity leave and ultimately have higher incidences of absenteeism (to care for sick offspring, among other things).
What’s next? Charging higher health insurance premiums to employees over 50? Denying them completely when they turn 60?
True, it’s accepted practice to charge more for life insurance as buyers age. But even here, we don’t arbitrarily treat every senior the same way. Buying a policy early in life entitles the purchaser to the same premium as someone years younger.
I don’t know about you, but to me there’s something sinister about punishing people in advance for things they haven’t done.
Not according to the auto insurance industry, which would have us believe people are guilty despite documented evidence of their innocence. Their rationale? Low numbers on a credit score.
Charging drivers higher insurance premiums -- for no reason other than a spotty credit history -- is not only unfair, but also immoral. Why should I, with zero moving violations against my record, and no accidents or other claims filed in more than 20 years, pay for my neighbors’ carelessness and aggressive driving – simply because his credit is better than mine?
The car insurance/credit score debate in Delaware opens a Pandora’s Box about issues surrounding the finance industry. I’ve personally spent hours, days, even months cleaning up factual errors in my own report. Fixing reporting errors and fighting the three credit bureaus alone could be a full time job.
To point out just how troubling the trend, I personally know several fine and otherwise upstanding people who suddenly find themselves in a chokehold because of credit score errors and the horrors of trying to fix them.
To be honest, I’m still baffled at why a friend who wrote of all her debt and declared bankruptcy has a better score than mine, when I decided to pay off my creditors instead. Isn’t that what banks what? People who pay their debts? Apparently not according to our scores.
And just what does any of this have to do with driving? My same friend has filed several car insurance claims in the ten years I’ve known her. I haven’t had one. She lives in a relatively high crime area. I don’t. But my insurance rates should be higher?
The insurance industry’s own arguments for the practice are the most troubling. “The score can’t predict accidents,” admits Jeff Junkas, a spokesperson for the association that represents insurance companies nationwide. “They only indicate the likelihood of a claim,” he explains.
When pushed about the fairness of the practice: “We don’t know why it works, but it does work,” he quips, as if the ends really justify the means.
Using his argument, we should charge women in the workplace higher health insurance premiums. Why? While we can’t predict they’ll get pregnant, we do know there’s a likelihood sometime during their career they’ll have kids. Consequently they will strain health benefits they’ll not only need prenatal care but also expect maternity leave and ultimately have higher incidences of absenteeism (to care for sick offspring, among other things).
What’s next? Charging higher health insurance premiums to employees over 50? Denying them completely when they turn 60?
True, it’s accepted practice to charge more for life insurance as buyers age. But even here, we don’t arbitrarily treat every senior the same way. Buying a policy early in life entitles the purchaser to the same premium as someone years younger.
I don’t know about you, but to me there’s something sinister about punishing people in advance for things they haven’t done.
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