No one likes to be dogged by a bill collector, and there are steps you should take to ensure that you resolve your situation quickly and aren’t bullied by unscrupulous collecting firms:

1. Don’t ignore calls or written communications from collectors.

2. Make the collector prove you owe the debt.

3. If a collector calls about a bill you already paid, show proof that you met that obligation.

4. Don’t tolerate abuse from debt collectors.

5. Take action if collection calls go over the top.

MSTribune: Congress should protect consumers from mandatory arbitration. The Minneapolis Star Tribune editorialized, “Consumers using credit cards, cell phones and other forms of credit — meaning most Minnesotans — got a major victory this week when state Attorney General Lori Swanson announced that the St. Louis Park-based National Arbitration Forum, the country’s largest arbitrator of credit collections, would stop most of its work in the state.” While some “now claim that a day in court may get very crowded if consumers go through the legal process for dispute resolution, it’s preferable to a system that allegedly was gamed in favor of big business against the little guy.” The Tribune argues, “But with credit cards and cell phones knowing no state borders, it’s well past time for Congress to pass a law to better protect consumers.”

From the American Association for Justice news release.

The Minneapolis Star Tribune reported, “Minnesota Attorney General Lori Swanson backed federal legislation Wednesday that would protect consumers from ‘fine print’ arbitration contracts that forfeit their legal rights against creditors. ‘Millions of Americans are giving away that right without even knowing it,’ Swanson told a panel of the House Oversight and Government Reform Committee.” Also appearing before the committee was Mike Kelly, CEO of Forthright, “which provides administrative services for the” NAF. Kelly “defended the company’s work as a simple and cost-effective alternative to the courts, saying that without access to arbitration, consumers would be the losers.”

The AP reported that Kenneth Clayton of the American Bankers Association testified that “arbitration is a valuable way for consumers and businesses to resolve disputes in a very low cost and fair manner. Take it away and consumers will suffer.” But “a study by Public Citizen found that credit card companies track arbitrators’ rulings and do not enlist the arbitrators who rule against them.”

From the American Association for Justice news release.

The information covers a wide range of consumer issues, including debt collection, frauds and scams, identify theft, mortgage fraud, price gouging, and tenants’ rights, and each topic is explained in an easy to understand format.

While it is often necessary to consult an attorney to take specific action in an individual case, the information available from the Office of the Attorney General is a good starting place to educate yourself about your consumer rights under the laws of the State of Texas and the Federal government.

The Associated Press reports that Obama “said Americans are demanding it. ‘Those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past,’ the president said in a statement accompanying the 152-page draft bill.” The AP adds Republicans “and bankers, however, already are balking and gearing up for a fight.” But Tom Quaadman, executive director of the U.S. Chamber of Commerce’s center for capital markets, said, “This isn’t only bad government but big brother lurking at everyone’s doorstep.”

The New York Times reports, “Banks and mortgage lenders are placing top priority on killing President Obama’s proposal to create” the financial consumer protection agency. Industry executives “vowed on Tuesday to fight Mr. Obama’s plan with everything they have, even though banks are still heavily dependent on many taxpayer-supported loans and loan guarantees to get through the crisis.” The “industry’s heated reaction presages an intense lobbying battle that is already beginning.”

From the American Association for Justice news release.

Texas Attorney General Greg Abbott sued Richardson-based Credit Solutions of America, Inc., in March 2009, alleging that CSA has defrauded Texans by failing to negotiate settlements with consumers’ creditors. Dallas-based Debt Settlement America is also under investigation.

Debt settlement companies know they have to clean up their reputation. “We’ve got to clean ourselves up fast,” said Scott Johnson, chief executive of U.S. Debt Resolve, a Dallas-based debt settlement company. Proposed legislation would set strict rules on how debt settlement companies operate, he said.

In recent testimony before the state Senate Committee on Business and Commerce, Johnson said that qualifications needed to offer debt settlement services are “almost nonexistent.” “At this time, there are no barriers to entry, and the impact on consumers looking for trusted sources becomes more difficult every day,” he said. “The standards that are currently established have been interpreted as watered-down, even diminished, which allows even the weakest nonperforming companies to exist at the consumer’s expense.”

Because of the ease with which debt settlement companies can be started, the industry has mushroomed from about 200 companies in 2005 to about 2,000 today. The proposed legislation would require debt settlement companies in Texas to:

–          Register with the state.

–          Give consumers a list of goods and services to be provided and charges for them.

–          Tell consumers that defaulting on debts can lead to lower credit scores and increased charges.

–          Charge a setup fee of no more than $400 or 4% of the client’s debt, whichever is less, and charge monthly service fees of no more than $50.

Corey Butcher, CEO of Dallas-based Financial Freedom of America, defends the industry, stating that critics of the industry “don’t see the clients that are achieving results.” Out of the $46 million in debts his company has settled since 2006, “our clients have actually saved over $19 million,” he said.

However, the Better Business Bureau of Metropolitan Dallas has seen an increasing number of inquiries and complaints about the industry. “It’s one of the most active categories that we have right now,” spokeswoman Jeannette Kopko said.

What types of debts are covered?

The Act covers personal, family, and household debts, including money you owe on a personal credit card account, auto loan, medical bill, or mortgage. The FDCPA does not cover business debts.

Can a debt collector contact me any time or any place?

No. A debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree to it. Collectors may not contact you at work if they are told (orally or in writing) that you’re not allowed to get calls there.

How can I stop a debt collector from contacting me?

If a collector contacts you about a debt, you may want to talk to them at least once to see if you can resolve the matter, even if you don’t think you owe the debt, can’t repay it immediately, or think that the collector is contacting you by mistake. If you decide after contacting the debt collector that you don’t want the collector to contact you again, tell the collector, in writing, to stop contacting you. Send the letter by certified mail, return receipt requested, so you will be able to prove the collector received your letter. Once the collector receives the letter, they may not contact you again except to tell you there will be no further contract or to let you know that they or the original creditor intend to take a specific action, such as filing a lawsuit.

Can a debt collector contact anyone else about my debt?

If an attorney is representing you about the debt ,the debt collector must contact the attorney, rather than you. If you don’t have an attorney, the debt collector may contact other people, but only to find out your address, home phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. Other than to obtain location information about you, a collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.

What practices are off limits for debt collectors?

1.         Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. They may not:

–          use threats of violence or harm;

–          publish a list of names of people who refuse to pay their debts (but they may give this information to the credit reporting companies);

–          use obscene or profane language; or

–          repeated use the phone to annoy someone.

2.         False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not:

–          falsely claim that they are attorneys or government representatives;

–          falsely claim that you have committed a crime;

–          falsely represent that they operate or work for a credit reporting company;

–          misrepresent the amount you owe;

–          indicate that papers they send you are legal forms if they are not;

–          indicate that papers they send you are not legal forms if they are;

–          indicate that you will be arrested if you do not pay your debts;

–          threaten to seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so;

–          indicate that legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action;

–          give false credit information about you to anyone, including a credit reporting company;

–          send you anything that looks like an official document from a court or government agency if it is not; or

–          use a false company name.

3.         Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not:

–          try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt (or your state law) allows the charge;

–          deposit a post-dated check early;

–          take or threaten to take your property unless it can be done legally; or

–          contact you by postcard.

Can a debt collector garnish my bank account or my wages?

If you don’t pay a debt, a creditor or its debt collector generally can sue you to collect. If they win, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the creditor or collector to get a garnishment order against you, directing a third party such as your bank to turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Generally, wage garnishment is not allowed in Texas, except for delinquent taxes, child support, or student loans.

Can federal benefits be garnished?

Many federal benefits are exempt from garnishment, including:

–          Social Security benefits

–          Supplemental Security Income (SSI) benefits

–          Veterans’ benefits

–          Civil service and federal retirement and disability benefits

–          Service members’ pay

–          Military annuities and survivors’ benefits

–          Student assistance

–          Railroad retirement benefits

–          Merchant seamen wages

–          Longshoremen’s and harbor workers’ death and disability benefits

–          Foreign service retirement and disability benefits

–          Compensation for injury, death, or detention of employees of U.S. contractors outside the U.S.

However, federal benefits may be garnished to pay delinquent taxes, alimony, child support, or student loans.

The companies that promise to clean up credit reports for a fee cannot deliver an improved credit report using the tactics they promote, and in fact, it is illegal. No one can remove accurate negative information from your credit report. If you see a credit repair offer, this is how to tell if the company behind it is up to no good:

–          The company wants you to pay for credit repair services before any services are provided. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services.

–          The company doesn’t tell you your rights or what you can do for yourself for free.

–          The company recommends that you do not contact any of the three major national credit reporting companies directly.

–          The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

–          The company suggests that you invent a “new” credit identity, and thereby a new credit report, by applying for an Employer Identification Number to use instead of your Social Security Number.

–          The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.

If you follow illegal advice or commit fraud, you may find yourself in legal hot water. It is a federal crime to lie on a loan or credit application, to misrepresent your Social Security Number, or to obtain an Employer Identification Number from the IRS under false pretenses. You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or internet to apply for credit and provide false information.

To learn how to improve your creditworthiness and find legitimate resources for low or no-cost help, see “Credit Repair: How to Help Yourself” at www.ftc.gov/credit. To obtain free credit reports, visit www.annualcreditreport.com. You are entitled to one free credit report per year from each of the three major credit reporting agencies, and this is the only website that provides access to those reports at no cost.

Federal law imposes limitations on how debt collectors can collect debts, including time-barred debts. Under the Fair Debt Collection Practices Act (FDCPA), a “debt collector” generally is any person or organization that regularly collects debts owed to others. The term includes lawyers who collect debts for others on a regular basis, but it does not include creditors collecting their own debts.

Most courts that have addressed the issue have ruled that the FDCPA does not prohibit debt collectors from trying to collect time-barred debts, so long as they do not sue or threaten to sue you for the debt. If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed by letting the court or judge know the debt is time-barred.

Whether a time-barred debt or any other debt can appear on your credit report depends on how long the debt has been delinquent. Debts that have been delinquent more than seven years cannot appear on your credit report, with certain exceptions. A debt collector may not try to collect a debt that has been discharged in bankruptcy, no matter when it was incurred. To learn more about credit reporting, visit www.ftc.gov/bcp/conline/pubs/credit/fcra.htm.

If a debt collector contacts you about a debt you believe to be time-barred, the debt collector must stop trying to collect if within 30 days of receiving notice of the debt, you send the debt collector a letter stating that you do not owe some or all of the money. If the collector gives written verification of the debt, the collector can renew collection activities.

You can stop debt collectors from contacting you about any debt, whether or not you owe it, by writing a letter telling them to stop contacting you. Once the collector gets your letter, it may not contact you again, except to say there will be no further contract or to let you know that the collector or original creditor intends to take some specific action, such as filing a lawsuit. Sending a letter does not absolve you of the debt if you actually owe it, and the collector or creditor still could sue you for the debt.

At last week’s news conference, Wendy Davis, D-Fort Worth, stated, “It is high time we put an end to the obscene profits that they are making off of our families who are just trying to make ends meet.” Davis is the sponsor of Senate Bill 2131, which intends to regulate credit service organizations (“CSOs”) that make payday loans. The Senate bill would place CSOs under the authority of the Texas Consumer Credit Commissioner, who would license the lenders, impose fee restrictions, and oversee debt collection practices.

Payday loans are small, short-term loans that are structured as advances on the borrower’s next paycheck. The borrower pays a fee and writes a post-dated check that the company agrees not to cash until the borrower’s payday. The normal fee for that service is equal to an annual interest rate of around 400%, although fees in excess of 1,100% are not uncommon.

Frequently, the borrower cannot afford to repay the loan out of their next paycheck, and the loan is either “renewed” for additional fees, or the post-dated check is dishonored when it is presented to the bank. Payday lenders have been accused of using illegal and abusive debt collection practices when attempting to collect funds to cover the dishonored checks.

Texas ranks fourth nationally in the number of payday lenders, and several Texas cities (including Fort Worth, El Paso, and San Antonio) have more businesses offering payday loans, check cashing, and pawn loans than they have bank and credit union branches. Fort Worth-based Cash America, the nation’s largest operator of pawnshops, has hired lobbyists and started a political action committee that gave more than $170,000 to national candidates in the run-up to the 2008 elections.

Rep. Luis Gutierrez, D-Ill., has sponsored a bill in Congress that would regulate the payday loan industry and provide crucial protections for borrowers. Gutierrez is the top Democrat on the Financial Services subcommittee, which is in charge of consumer credit issues. Although he originally wanted to ban the payday loan industry entirely, he says his bill is the best deal he could manage in the face of the industry’s aggressive lobbying. “While they may not be JPMorgan, Chase, or Bank of America, they’re very powerful,” he said.

Advocates of payday lending defend their practices, saying that the loans are very economical compared to the cost of several bounced checks, and that they are the only quick-credit option for many low-income and moderate-income people. Critics contend that the loans are inherently abusive products that trap borrowers in a devastating cycle of debt.

Obama made it clear that he did not back the changes with the intention of assisting those who buy more than they can afford through “reckless spending or wishful thinking.” “Some get in over their heads by not using the heads,” he said. “I want to be clear: We do not excuse or condone folks who’ve acted irresponsibly.”

According to the White House, nearly 80% of Americans have credit cards, and half of those carry a balance. The average balance is $7,000. The Federal Reserve estimates that the nation is $2.5 trillion in debt, not including home mortgages.

At the signing ceremony, Obama said that many people have become “trapped” because the economic downturn has turned family budgets on their heads. But, he said, “part of it is the practices of the credit card companies.” He criticized policies that allowed for confusing fine print, the sudden appearance of unexplained fees on bills, unannounced shifts in payment deadlines, interest charges or rate increases even when payments aren’t late, and payments directed to balances with the lowest interest rates rather than the highest.

The new credit card rules take effect in nine months and provide:

–          Accounts must be at least 60 days late before issuers can raise rates on existing balances. If the cardholder makes the minimum payment on time for six months, the previous rate must be restored.

–          Promotional rates cannot rise for six months and rates on new accounts cannot rise for one year.

–          Bills must be sent 21 days before the due date.

–          Customers must receive 45 days notice of higher rates.

–          Customers under age 21 must provide proof of ability to repay credit or get an adult to co-sign.

–          Risk-rating policies used to raise interest rates must also be used to lower interest rates.

–          Over-the-limit charges may not be made without customer approval.

–          Statements must disclose how long it will take to pay off a balance if only a minimum payment is made.

–          Statements must include a toll-free number from which consumers can get information about credit counseling and debt management.

The new rules do not provide for:

–          Caps on interest rates.

–          Prohibitions on new annual fees.

–          Prohibitions on late fees and over-the-limit fees.

Getting approved for a new credit card will likely be harder also, even for consumers with high credit ratings. With credit harder to obtain, consumers could begin turning to payday lenders and pawn shops for quick cash, said Greg McBride, senior analyst with Bankrate.com. “In the absence of credit cards, people in need of a short-term loan will resort to other means.”

It is expected that within the next nine months before the new law goes into effect, credit card companies will devise new ways to keep their profits high, such as charging higher rates for new customers, charging higher annual fees, raising fees for services such as balance transfers and cash advances, and issuing cards with lower credit limits. “The next nine months are going to be filled with issuers implementing changes while they still can,” said McBride.