Mortgages weren’t the only thing lenders and banks were making money on when the economy was crashing. Many banks had figured out they could build a profitable business with deceptive credit card practices. Some of the practices were the ‘low teaser rates’, double-cycle billing, not posting your payment immediately and changing the due date. The companies also targeted people they knew couldn’t pay which enabled the company to raise the interest rates.
The latest credit card dirty trick is targeting consumers who have an old, unpaid debt. Each state has statutes limiting the length of time a creditor or collection agency can sue to reclaim money owed to them. States vary between 3 to 10-years on their limitations.
Collection agencies are now partnering with banks that offer new credit cards to people with less-than-perfect credit histories.
Let’s say you receive an offer from a company for a new credit card. You accept the offer thinking you’ll get a fresh start with a new card. Buried in the tiny print is language saying you agree to pay that long-ago debt. You’re shocked when you receive your first statement and see a huge amount owed from years ago. One consumer had a 20-year old debt attached to her ‘new’ card.
For the third year in a row, complaints about credit card billing and fees, mortgage-related fraud, predatory lending and abusive debt collection tactics take the second-place spot of all complaints made in the U.S. (auto complaints took the number one spot).
The $11 billion per year debt collection industry has just exploded. Collections are on the rise and collectors are reviving expired debts with new, inventive ways to get money. It’s easy to say read the fine print, but the fine print can be deceptive as well. Be wary if an offer is given to you. Don’t jump at sending the ‘quick and easy’ application back before checking the terms as much as possible. And ask yourself if you really need that card.
Collectors “buy” a ‘past the statute date’ debt from credit card banks, lenders, even cell phone companies and other firms. Buying these debts is very lucrative because all or almost all the money the collector can get from the consumer is pure profit. Collectors often resort to tactics you never thought possible. In many states, if you make even a small payment on an old debt, the statute of limitations starts all over again. Most collection agencies won’t tell you the legalities of restarting the debt.
Often, these old debts are poorly documented but the collector will continue to call you, even if the debt isn’t yours. If this happens, send a letter by certified mail with a return receipt requested telling the collection agency you don’t owe the debt and to stop contacting you. If the collector is calling your cell phone number you can also send them a letter telling them to stop calling your cell phone (send certified/return receipt).
The Monterey County Bank did pay a settlement without admitting or denying wrongdoing after the FDIC accused it of helping a debt collector revive expired debts with deceptive card offers. Whether other banks will be penalized is anyone’s guess.
According to the Consumer Financial Consumer Bureau (CFPB), around 84% of their complaints involve credit card fraud and deception.
In 1977, Congress passed the Fair Debt Collections Practices Act. Their goal was to prohibit any harassing, unfair or deceptive collection practices. The Federal Trade Commission (FTC) publishes a plain-English guide what this 1977 law means.
In July 2010, the Dodd-Frank Act was enacted to help regulate the financial industry and implement rules for consumer protection. The Dodd-Frank Act covers a multitude of areas from real estate appraisals to employment. From this Act, the CFPB was created to protect consumers from large, unregulated banks.
Last week the first public enforcement action against a credit card company was announced. Capital One will have to refund $140 million to two million consumers and pay a $25 million penalty as a result of misleading and deceptive practices they had placed on their credit cards. Capital One received a regulatory rebuke for misleading card customers into buying unnecessary products like payment protection and credit monitoring.
The consumer can file a complaint with the FTC online. Filing would at least get your complaint in writing, although the clients I know never hear or receive anything after filing.
The FTC did go after CompuCredit recently, a credit card company that issues credit cards for people having poor credit. The company was deceiving customers with their VISA cards including Aspire Visa and Aspen. These cards were marketed to subprime credit customers telling the customer they’d get a card with $300 credit limit without any up-front fee. In reality the company was charging, without disclosing a large fee for a one time application charge, one time application processing charge, an annual charge and monthly maintenance charge. They also deceived customers by marketing Visa credit cards to customers with charged-off debt. Once they accepted a new card, the old, charged-off debt was immediately transferred to the ‘new’ card and the customer would not receive a card at all until 25 to 50% of their old, charged-off debt was paid.
If thinking of getting a new card, carefully go through the fine print, don’t fall for the catchy headlines, jingles and promises, go online and do your own research and don’t fall for any outrageous offers.
If you have been a victim of unfair and deceptive trade practices, predatory lending, or if your credit card company has engaged in violations of Fair Debt Collections Practices, please call Keith Gantenbein of The Gantenbein Law Firm at 303-618-2122.
Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.