Credit/Debt Recovery

Good Speech, Orrin

Right after my last post, Senator Hatch's speech took a nice turn; he sounded a lot like me up there. Towards the end, he was speaking the truth; this bill will not hurt lower-income families or individuals, and it will NOT make it harder for consumers to declare bankruptcy.

I'm afraid he's not going to get his wish when it comes to the Schumer abortion amendment, though. We'll wait and see.

CSPAN ≠ Entertainment

Watching CSPAN for an hour is like chinese water torture, but I'm feeling like the BK bill has a shot at passing. I didn't think Sen. Leahy put up too big a fight, and it may all come down to Schumer's abortion amendment again (and what the house does with this).

I have to say, I don't think the "credit card deadbeats" stuff is particularly helpful, Senator Hatch. We're trying to help consumers, not blame them. I really think the way to talk up this bill is to focus on the postive ways it helps all of us rather than the ways it might make "deadbeats" more accountable for their debt.

Still, I'm encouraged so far by what I'm seeing, even if it's walking, talking Sominex up there.

Senate debate today

Today at 2:00 est, the Senate will convene to discuss s.256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

I'll try to get it on CSPAN, and maybe even live-blog it, if I can figure out what that means.

Here's the bill

It occurs to me that maybe I should put the BK reform bill here for interested parties (WARNING: it's a big file, and a very long read).

Download s.256.pdf

Anyway, if you're curious, you can have a go at trying to get through this thing.

Bankruptcy Professors oppose BK reform

The American Bankruptcy Institute is hosting a letter from many professors of bankruptcy law opposing the pending Bankruptcy Reform legislation.

I haven't gone over it with a magnifying glass yet, but on first reading, there are few surprises. For one, the esteemed professors are blaming skyrocketing bankruptcy rates on credit cards and the way they are marketed to consumers. We've also been hearing a lot about how many people file BK because of medical expenses, but it's hard to cast someone as a bad guy in that scenario. Better to go with creditors, because it's easy to pick a villain.

And on the other side, it does no good to call BK filers "deadbeats" if they filed because of runaway health care costs. Better to pick on people who overextended themselves with credit.

Am I the only person who sees both sides of this thing? There are no villains here, folks. We're trying to fix the bankruptcy system to make it more fair and effective. The law professors never directly mention how much harder it will be for bankruptcy attorneys after this bill is passed, but you can be sure that's a part of their objection. And the sponsors of the bill have pockets full of creditor-contributed campaign funds, and somehow I think that might affect how they vote.

The profs are attacking the means test here; they argue that it will unfairly discriminate against the elderly and families with children. I don't think so; only 3-5% of BK filers will be affected by the means-testing provisions of the bill, and those are the wealthy BK filers. The elderly and struggling families should have no trouble declaring bankruptcy if they need to.

The professors' letter concludes by saying that "Our concern is with the provisions addressing "Bankruptcy Abuse." These provisions are so wrongheaded and flawed that they make the bill as a whole unsupportable. We urge you to either remove these provisions or vote against the bill." I think they're talking about sec. 221 of the bill, which holds bankruptcy preparers accountable (and levies fines) for taking advantage of bankruptcy filers. No wonder law professors hate it so much.

Identity Theft Recovery

I was watching the Discovery Channel last night, and they reiterated that identity theft is still America's fastest-growing crime. They also said it takes over 600 hours for victims to clean up the damage. That's a lot higher than previous estimates I'd seen, but I think we can take the Discovery Channel at their word.

Who has 600 spare hours to deal with identity theft? This is another reason reputable counselors need to be actively engaged in repairing consumers' credit. Identity theft recovery is a valuable service that some people need, and if your time is at all valuable, it'd be cheaper to pay a service $150 or so to fix an identity theft problem than to do it all yourself.

Thom got blogged

My hetero-lifemate and writing partner Thom Fox was mentioned in a really cool blog by a friend of his. All the good things they say about Thom are true. If they carry out Stevie's idea to have an ongoing Thom update, I might even tell them the Carmex story.

Repair Your Credit and Knock Out Your Debt reviewed

I know it's bad form to quote one's own reviews, but I just got a nice review from Topher on his blog that I want to link to. Here's the review, and by all means, check out the rest of his blog while you're there. He really gets the book, I think; we're trying to put out a debt recovery book for under $10, to appeal to people who need motivational guidance rather than lots of charts and forms.

He also gets the concept of bankruptcy; I keep saying that bankruptcy isn't a problem for the creditors, it's a problem for us.

I'm glad I was able to give him a reading respite from the Baroque Cycle-I recently read Stephenson's Cryptonomicon, and while it's a great book, at 1200 pages it'd also make an excellent doorstop.

Thanks for the good review, Topher!

Bogus Press Release from NLDC

Today PRWeb has run a bogus press release from the National Legal Debt Centers. It's so completely wrong on so many levels, I wonder if the NFCC might actually do something to defend itself.

There is a severe financial crisis now in the Consumer Credit Counseling (CCC) Industry, with many either going out of business or being closed by government agencies. And, it's estimated that 10 million Americans annually who enter CCC programs will be left out in the cold.

This is completely wrong. I don't even know how they would go about making up a figure like that. Perhaps Ameridebt and NCC or agencies like them have been shut down and have left 10 million clients without a credit counselor. But that doesn't mean 10 million people annually will "be left out in the cold." And I already blogged here that MMI is taking over Ameridebt's client portfolio, and MMI are good guys.

I also think it's misleading to suggest that "Consumer Credit Counseling (CCC)" agencies are being closed by the government. They're obviously trying to take a big swipe at CCCS agengies, which are NOT the ones under investigation and have NOT been shut down by the IRS.

Here's another innacurate gem:

Consumer Credit Counseling (CCC) companies were established back in the early 80's when credit card companies started to notice that many people were having problems making their minimum payments and were starting to default on their debt.

Springboard has been in business over 30 years, and the NFCC was founded in the 1950's. The NLDC doesn't know what it's talking about.

Don't be confused, this type of company never negotiates down the principle balance of your debt.

Here's where we see that NLDC is a debt settlement agency. Credit counselors never negotiate balances down; never claimed to. Who's confused? This settlement agency seems to me to be shady; trying to attract deadbeat debtors who don't want to pay their obligations. Credit Counselors seek to help people who desperately WANT to meet their obligations but need some help. Yes, some non-profit credit counselors can assist with debt settlements, but that's not their primary service. They're non-profit education organizations first and foremost; they'll do the settlement only if it's the BEST option for the client (and don't be confused, sometimes a settlement is the best way to go).

These CCC organizations work for the creditors, not you. They are just like a collection agency. In addition to what the creditors pay the CCC company, they charge you a monthly service fee for dispersing your money to your creditors. Until recently these companies were paid a commission of around 12% to 15% by the creditors for recovering the debt for them.

Nonsense. The creditors hate credit counseling. They've been slashing fair share funding for a decade. Nobody's giving anything close to 12% any more.

And who would you rather have funding credit counseling? The consumer or the creditor? When fair share is gone for good (a day that's fast approaching) counseling will have to be funded mostly by client fees. Then groups like the NLDC will criticize credit counselors for charging clients too much! This is a nonsense argument.

The net result of cutting the commission to CCC programs was that many of the CCC companies became unstable (thus the poor reputation that ensued). Some of them could not make the consumer's payments to the creditors on time or, in rare cases, at all. Consumers started seeing late charges accumulate, and in the worst-case scenarios payments were either far less than what was agreed to or some payments were missed altogether. (Several well-known credit card issuers refuse to work with any CCC company.)

The poor reputation foisted on credit counseling didn't come from falling fair share contributions or agency instability; the poor reputation came from rampant profiteering on the part of big non-NFCC, non-AICCCA agencies. That, and from constant attacks from "consumer groups" and debt settlement competitors.

And what's that line about "well-known credit card issuers refusing to work with any CCC company?" I've been criticizing the creditors for years for not being discriminating enough--they'll accept payments from any scam credit counseling operation. The creditors loved Ameridebt until it all went bad.

Despite marketing efforts and glowing remarks to the contrary, CCC programs do affect your credit report, so don't be misled. When you are accepted into a CCC program your creditors will close your accounts and report this to the credit bureaus. Although this is far less damaging than bankruptcy, it definitely does impact your credit rating. Don't let anyone tell you otherwise, just to sell you their service! Instead, look into other options.

I've handled this so many times I'm sick of it. Credit counseling won't affect your credit score. If your credit is terrible when you enter counseling, it'll be bad when you finish. If it's good when you enter counseling, it'll be good when you finish.

I think they're saying, without saying it, that you should come to them for debt settlement services. This is worse for your credit rating than credit counseling, and not as bad as bankruptcy.

This all makes me angry and frustrated; once again, here's my point: Why not tell the world what you can do for them in a positive way? Some people can benefit from debt settlements (beats bankruptcy). But why try to destroy credit counseling in the process? I'm so sick of these unwarranted attacks on what is on balance a good industry. Does the NLDC provide free personal finance education? Do they provide free HUD-certified housing counseling to help people keep their homes? Do they help increase homeownership in the community? Are they accredited by COA? Are they members of the Better Business Bureau? Or do they just talk #$^%?

I don't go after debt settlement agencies. For all I know, the NLDC does their job very well. But I can't trust any organization whose marketing strategy is to attack their competition with misleading statistics and half-truths. Do business with this kind of company at your own risk.

NJ to require parental consent for credit cards

Found a link to this article on Fark.com. Basically, it says New Jersey is poised to require parental consent for people under 21 before they may be issued a credit card.

I've blogged about this before, and got a lot of replies from readers disagreeing with me. I really don't think we should delay the onset of adulthood to age 21. Bills like this one say that 19 and 20 -year olds are powerless to make their own decisions. I think a better law would require more education for people before getting credit, or requiring every college freshman to have to take a basic financial literacy course.

When I turned 18, my birthday present from my parents was a suitcase. As in, "get the ---- out." Would they have signed a permission slip for me to get a credit card? They would have thought the idea laughable. They had two kids by the time they were 21. And had they signed a permission slip, would they then be accepting responsibility for my debts should I default on them? I can tell you what my dad would have said to that.

And of course, if I am not responsible enough to have a credit card at age 19 without mommy and daddy's permission, am I not responsible if I commit a crime at that age? Can 19-year old murderers in New Jersey share responsibility with their parents for their crimes?

We have an age at which one may be tried as an adult, an age at which they may be executed for their crimes, an age at which they can drive, an age at which they can enter the military and vote, and an age at when they can drink, gamble, and apparently, apply for their own credit. Why not have the government mandate when children must be toilet trained, or at what month women must stop breast feeding? Let's think of the children! America will be great when no one has to think for themselves.