Shame on Midland Funding

(This is why we work so hard on challenging the creditors directly.  And,  Master Credit Solutions (MCS) is one of a very, very few companies that will do this.)

The Minnesota Attorney General on Monday accused one of several nations’ largest debt collection firms of defrauding Minnesota courts and citizens by filing false and deceptive "robo-signed" affidavits -- generated at its offices in St. Cloud.

Midland Funding LLC, which also is one of the nation's top buyers of old personal debt from credit card companies and others, has been one of the most active in suing people over debt and seizing their bank accounts, wages and property through garnishment in Minnesota.

In a press release about a lawsuit filed Monday, Attorney General Lori Swanson alleged Midland created false and unreliable mass-produced, "robo-signed" affidavits as supposed "proof" of consumer debts in lawsuits against individual citizens in order to obtain judgments against or extract payments from people, most of whom had no attorney and some of whom had no knowledge of any alleged debt.

Robo-signing is the practice of signing off on mass-produced, computer-generated legal documents without reading them or verifying the truth of the contents in order to speed up the collection process, Swanson's statement said.

Midland and its publicly-traded parent corporation, Encore Capital Group, Inc., have paid more than $1.8 billion to obtain 33 million customer accounts with a face value of about $54.7 billion, or an average cost of about three cents on the dollar, according to the Attorney General's office based on company regulatory filings. Midland and Encore buy electronic portfolios containing billions of dollars of old, charged-off consumer debt from credit card companies, banks, telecommunications firms, and other creditors, the Attorney General's statement said.

BAD CREDIT STATISTICS

Bad Credit Statistics

While it may not seem relevant, different states in America are well considered to have different credit ratings. In this post, we've centered on the results of the 2010 annual survey of credit reporting agencies in the United States, to see if we can uncover some of the statistics.

Here, we will look at the State with the best credit ratings, and States which are known for poor credit ratings. Following this analysis, you'll be able to tell exactly whether you are substandard, average, or higher than average with your individual credit score.

Top Credit Score States

So, which State in the United States traditionally gets the best and highest credit scores? The result which comes up most often is Minnesota. This State is closely followed by the Dakotas. In each one of these States, the average credit score sits at around 720 - that is relatively high on the credit rating scale.

Why is this score so impressive? It might be due to a number of reasons. Firstly, housing within these States is relatively cheaper in comparison to houses in other States. Hence, the fact that they are more affordable means that the rate of foreclosure is also much lower in these states.

It appears therefore that a direct link could be drawn between the rate of foreclosure and the rate where bad credit affected credit worthiness.

Worst Credit Score States

Following on from the above logic, it is clear that a State with a high rate of foreclosure will probably suffer from poor credit, and for that reason have worse credit scores than other States.

This is correct when you consider the state with the worst credit statistics - Nevada.
In Nevada, the common credit score is about 670 - quite poor compared to the best States on the market. Other States which rank with bad credit ratings are Texas, Louisiana, Mississippi, and South Carolina.

If you live in one of these areas, you should be aware that your possibility to acquire credit might be being hampered simply by the State that you live in.

DEBIT CARDS TO BE LIMITED

DEBIT CARDS TO BE LIMITED

Your debit card may soon be denied for purchases larger than $100 -- or even as little as $50.

JPMorgan Chase, one of the nation's largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal. The restriction would apply even if you run your debit card as credit.

Why?  Because of something called interchange fees.

Right now, every time you use your debit card your bank charges the store an average fee of 44 cents, which it shares with its partners. Those little fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.

But legislation passed last year that these fees would be slashed. The Fed (also known as the Federal Reserve System) is currently proposing rules that would go into effect in July 2011 that would cap interchange fees at 12 cents.

That's a big enough cut to cost Chase more than $1 billion a year. And Chase is not be alone. Other major debit card issuers are also projecting huge losses from the interchange fee cap.

Joe Price, president of consumer banking for Bank of America said in an e-mailed statement that the lower fee wouldn't fairly compensate the bank for the infrastructure and services it provides to retailers.

As a result of the lower interchange fees, the maximum the card companies would allow to be charged could be capped at $50 to $100.

And consumers would end up feeling the pain when Bank of America is forced to recoup costs "by increasing the cost of their everyday debit card transactions, limiting their payment choices, and impacting industry innovation," according to the email.

THE COST OF BAD CREDIT

THE COST OF BAD CREDIT

Have you ever wondered how much bad credit can cost you?  I have – and I went out looking for information about the cost of bad credit.

Bad or even mediocre credit can cost you a lot of money over your lifetime.

That was true even before the credit crunch.

Now, with so many lenders running away from risk, the contrast in score-based interest rates is even starker on many loans. The short version: Lower scores can cost you hundreds of thousands of dollars in extra interest and radically change the way you're able to live your entire life.

Here's a scenario that can help you understand how.

Joseph and Colin are friends who borrow about the same amount of money over their lifetimes:

Each gets $20,000 in private student loans to help pay for college.

College is also when they get their first credit cards, and they each carry an $8,000 balance, on average, over the years.

They buy new cars after graduation and replace them every seven years until they buy their last vehicles at age 70.

Each buys his first home with a $300,000 mortgage at age 30 and then moves up to a larger house with a $400,000 mortgage after turning 40.

Each takes out a $50,000 home-improvement loan to remodel the second house.

But Joseph has a FICO credit score of 750, which is considered good to excellent. Joseph maintains his good credit scores by always paying his bills on time, applying for credit sparingly and never maxing out his credit cards. Lenders respond by increasing his credit limits and giving him more offers of credit, allowing him to spread his balances across several cards and further protect his scores.

Colin has a 619 score, which is considered fair to poor, depending on the lender. Colin doesn't always pay on time and sometimes maxes out his cards, which makes lenders reluctant to extend more credit. He tends to carry larger balances on fewer cards than Joseph, which further hurts his scores, and Colin has less ability to negotiate lower interest rates.

The following examples of what they pay are only illustrations. In real life, interest rates will wax and wane over time while the amounts paid for houses and cars will vary. But the illustrations will give you a pretty good idea of the potential cost of not-so-great credit.

Federal student loans don't take credit scores into account, but private student loans do, and the penalty for worse credit is significant. Interest rates vary by lender, but someone with a 750 score can expect rates that are around 5 to 6 percentage points cheaper than someone with a 650 score.   The penalty to Colin:  $16,189.

Credit card issuers have tightened their lending standards in the past couple of years, which means higher rates and stricter standards for just about everyone. Whereas a 720 credit score used to get you the best rates and terms from many issuers, some now require 750. Even getting a card can be tough if your scores are below 675.  A few years ago, even those with "subprime" scores of 620 had a slew of offers.   Penalty to Colin:  $36,000

A few years ago, Colin would have paid about 3 percentage points more for a 60-month new-car loan. Today, that penalty is more than twice as high, according to myFICO.com, which tracks rates for auto and mortgage loans based on FICO credit scores. The difference significantly inflates the interest costs for every $25,000 vehicle he finances over a lifetime. Penalty to Colin:  $74,480

Interestingly, the penalty for poorer credit is somewhat less these days than during the boom years of real-estate lending.

Back then, credit scores drove the ship, with other factors, such as your down payment, provable income and debt load, taking a back seat. Lenders weighed the scores so heavily in their calculations that even small differences in scores could result in large interest-rate differences.

That gap has narrowed as mortgage lending in general has become stricter and lenders take other factors into account, but the cost of a lower score is still significant.

For the men’s first homes, paid for with 30-year, fixed-rate loans for $300,000 paid over 10 years.   Penalty to Colin:  $24, 210

For their second homes, paid for with a 30-year, fixed-rate loan for $400,000 over 30 years:

Penalty to Colin:  $73,217

Like car loans, home equity lending is extremely sensitive to credit scores, so Colin pays a rate that's 3 percentage points higher than Joseph's for a 15-year loan for $50,000: Penalty to Colin:  $16,560

The total cost of Colin's lower scores? As a 30-year-old with a mortgage, car payment, student loan and credit card, he pays $372 a month more than Joseph does for the same amount borrowed. Over a lifetime of borrowing, he pays an astounding $201,712 more.

That estimate may be low. It doesn't count the higher cost of insurance he's likely to pay, because most auto and homeowners insurers charge bigger premiums for those with worse credit. It doesn't factor in the trouble Colin may have had renting apartments before she bought her first home, because landlords check credit scores, too.

It also doesn't count opportunity cost -- what Colin might have earned if he'd been able to invest the extra money he was paying to lenders. If you divided the $201,712 penalty over 50 years and figured an 8% average annual return, ====================

Those interest payments could have turned into a retirement kitty worth more than $2.3 million.

But mostly, the cost above doesn't quantify a lifetime of struggling with money. Because more of Colin's paycheck went to lenders, he had less money for everything else, from vacations to his kids' educations.

Sometimes we see a number and we cannot understand it – we cannot fathom the enormity of it.  If you factor a dollar for every mile, you could go to the moon 10 times!  You could go around the earth 98 times!  You could buy 46 MB!

THE UPSELLING OF THE CREDIT CARD

The Up Selling of the Credit Card

I recently received a credit card offer from Orchard Bank in the mail.  With all that is going on in the credit world, I wanted to see and feel the process my clients are going through in trying to re-establish their credit.

I filled out the authorization form they provided me online, and was approved.  Shortly, they stated, I would receive my card in the mail.  It came about 2 weeks later.  I reviewed all the documents, and called the number to activate the card, which was done.  I was ready to purchase, or so I thought…………………

About a week later, I wanted to purchase something on line, and I thought I would try this new card.  I put in the correct information and was rejected.  I thought that was strange – so I went to the online portion of Orchard Bank and saw that I had some start up fees – about $75 – so I thought, even before receiving a statement from them – I thought I would pay those off, which I did.  I then tried the card again for my purchase – and was rejected again.  Oh well, maybe it takes a while for the information I gave them to hit the account.  I then completed the purchase with another card.

Two weeks later, I go into my local grocery store and thought I would try it again.  Again, it was rejected.  Immediately when I went home, I called Orchard to find out why.  (I even checked online if my payment had been accepted, which it had been.)  The person on the other end of the phone said yes, everything was fine; they had just needed me to call in to finish the process of “activating the card”.  I told him I had already done that –I had called in to the “activation Phone Line” and had gone through that process. 

He stated that he would take care of the final part of it.  He just needed to talk to me about purchasing their credit monitoring system – an incredible system that will show you how to maximize your scores.  The system would cost just $9.99 per month, billed conveniently to my credit card.  I fought off the desire to tell him what my line of work was – dealing with systems just like the company he represents.  However, I did not – I just told him I had another credit monitoring system.  He refused my answer, told me how important it was to have his system – and for just $9.99 per month.  I again told him I had a system in place.  He again, refused my answer.  He then again went into his diatribe about his system of credit monitoring.  Seeing there was no end to this, I then accepted, knowing that I could cancel at any time.  He said thanks, activated my card fully, and we parted ways.

The only item needed to activate my card fully was some face time with a rep from the company to sell me, and a hard sell, on credit monitoring.  In the dispute process, they, the creditor, want a direct relationship with the customer to up sell and to deal directly with them if there are any disputes.

Most people are not aware of their legal rights regarding their own reports.  The creditors want you to bypass those rights – “Tell us why you think we are wrong” – in other words, show me your defense.  In fact, the client has to show the bureaus or the creditors nothing!!!  It is the creditors and the bureaus that have to show the information they put on the reports is correct.  The burden of proof, if you will, is on them, the bureaus and creditors.  Could you imagine being arrested in the criminal justice system, and they tell you you have to prove your innocence?  It just does not happen that way in our society.  The same applies to the credit industry.