Michigan Collection Law Blog

On more than on occasion, I have advised you to get your free credit report as is your right under the Fair Credit Reporting Act. Once a year, you can obtain your free credit reporting by visiting www.annualcreditreport.com.

I have also advised you to check it out and to make sure that it is accurate because more than 80% of all credit reports contain inaccurate information. I have been remiss because, until now, I have not told you HOW to go about disputing an item on your credit report. This is very easy to do; here's how:

1. Visit www.annualcreditreport.com. This is the official website sponsored by Experian, Equifax and Transunion. These are the big three credit reporting agencies. Be prepared to answer come key questions about recent credit transactions in order to obtain your credit report. Don't have a computer? No problem. You can call the annualcreditreport.com people at 877-322-8228.

2. Read the credit report. OK, its not going to read quite as easily as you may like. But, if you were smart enough to get to this step, you are smart enough to spend a few minutes to read the instructions about how to understand your credit report. Let me give you some key ideas about reading your report.

Key idea 1 - Make sure all of the reported accounts actually belong to you. One of the biggest mistakes that the credit reporting agencies make on credit reports is called "mis-merging." If someone else has a name that is similiar to yours, a credit reporting agency may report that other person's debt on your credit report. Be vigilant and review your credit report to make sure that all of the credit grantors who are reporting anything about you are actually YOUR credit grantors. This happens more frequently than you might guess.

Another way for an account to find its way to your bureau that should not is when you are merely an "authorized" user of an account rather than the one who owns the account. For example, Rachel gets a visa credit card. She calls her bank and asks for an additional card for Jonah. Jonah racks up a bill on Rachel's account. That account should not be reported on Jonah's credit bureau because he is not responsible for that bill. Frequently, however, the credit card companies will report the bill to both Rachel and Jonah's account. If you are Jonah and the credit entry is not good, then dispute it and get it off your credit report.

Key idea 2 - Check the validity of late payments reported on your credit report. Nothing drags your FICO score down as quickly or frequently as a late payment. Credit grantors frequently report payments as current, late 30 days, late 60 days, late 90 days, etc. Read those payment reports. See if any late payment has been reported about you. Sometimes a credit grantor will report you as a late payment when you have not been late. For example, some years, ago, American Express had reported me as having failed to pay my bill altogether....until I faxed them the cancelled check. I could not believe that they had screwed up that bad. Nevertheless, the lesson is plain....credit reporting agencies screw up all the time. If they do, it is your responsibility to make sure that they have their facts right.

Key idea 3 - Check the expiration date of any derogatory information on your credit report. Bad debts that are yours can only stay on your credit report for 7 years. Bankruptcies can only stay on your report for 10 years. Any debt older than these dates must come off your report. Frequently, they do not. Simply follow the dispute instructions below to remove expired debts.

Key idea 4 - Check out the Public Records. This includes judgments, tax liens. Since these items are filed by name and not by one' s unique social security number, it is very likely that someone with even a somewhat common name may have an items appear on his or her credit bureau. Make you are not one such victim.

HOW TO MAKE YOUR DISPUTE

1. On line. Its a piece of cake. With your credit reporting sitting on your monitor, there is a unique identifying number next to each item on your credit bureau. You can click the DISPUTE button next to each such item that you dispute. Then a pull down list of REASONS FOR THE DISPUTE will appear. Select the appropriate reason. It is just that simple.

2. By mail - In your letter that you will have to address to the particular credit reporting agency that is reporting the offending entry, be sure to put your name, address, telephone number and social security number on the letter. Also put the identifying information about the credit report you are disputing. (e.g. my credit report of September 15, 2007. Report number. xxxx -x-x---xx). Then, make sure that you report the name of the credit grantor and the identifying number of the entry in your letter. Finally, state why are you disputing that item.

WHAT HAPPENS NEXT?

As soon as the credit reporting agency receives your dispute, it is required to present your dispute to the credit grantor. The credit grantor then has 30 days to either verify that the debt is being properly reported or to remove it. By default, if the credit grantor does not verify the debt within that 30 day period, the item must be removed from your credit report. But note, that if the credit grantor subsequently verifies that debt as being reported accurately, it can have that debt placed back on your credit report.

THE CREDIT GRANTOR IS STILL REPORTING THIS DEBT ON MY CREDIT REPORT WHEN IT SHOULD NOT

You then have two options. Option 1 - sue the credit grantor. Note that you cannot sue the credit grantor until you have gone through the dispute process above. If you file a lawsuit without having gone through this process, you will get kicked out of court. Better yet, hire an attorney who will guide you through the litigation process. The attorney will or should cost you nothing out of pocket since under the Fair Credit Reporting Act, you are entitled to attorneys' fees if you prevail on your case. Note that most of these kinds of cases settle anyway and if you are in the right, you will likely get a favorable settlement.

Option 2 - You can put up to 100 words on your credit report to inform people of your side of the story. This rebuttal option will not fix any damage done to your FICO score on account of the creditor's reporting you as a late pay. It will give a reader, however, an idea of why this item is being reported as it is. This is not my favorite option because the damage done to your credit is not fixed with this option.

There, I feel better. You now know how to dispute items on your credit report. Now, I can go back to preaching to the world "Pull your credit report every year." I can now tell the world, "Go dispute whatever is incorrect with your report. It's easy and I have told you how to do it."

Under the Fair Credit Reporting Act ("FCRA"), soliciting lenders are able to give search criteria to credit reporting agencies. The agencies then provide a list of persons by name and address who meet those criteria to the soliciting lender. Fear not, as these lenders are not provided with your social security number. Moreover, the furnishing of your name and address to these lenders does not leave a foot print on your credit report as an inquiry into your credit by a lender with whom you have applied for credit would. These soliciting creditors

Then, the soliciting enders may make offers of credit to the persons on this list. However, under the FCRA, these offers must be "firm offers of credit" which means that the lender must be ready to close that loan on the terms that it offers.

Some people get bombarded with telephone calls, letters, and now emails by lenders asking to for their refinance business. If you are one of those persons that constantly receives such solicitations, you can opt out by visiting www.optoutprescreen.com. It's the official website of the Consumer Credit Reporting agencies and it will prevent your name from going to these soliciting lenders. Opting out is easy. Just follow the link on the blog and fill out the information requested. Then, go live in peace.

It is time to get your free credit report. Note that you have a right under the Fair Credit Reporting Act to get a free copy of your credit report, once a year. Be careful. There are a number of companies that use this as bait to get you to buy their credit monitoring services for a monthly fee. You do NOT have to sign up for any of these credit monitoring services to get your free credit report.

Note that you are entitled to a free credit report annually. You are not entitled to see your credit score for free. That you have to purchase.

To order your free annual report from one or all the national consumer reporting companies, and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281.

There is an excellent chance that there is something erroneous with your credit report that is dragging your credit score down. Indeed at least 70% of all credit reports have some sort of erroneous information. This can include data that does not belong to you. Derrogatory information that should have fallen by the way side (7 years for a late payment, 10 years for a bankruptcy). It costs you nothing to look at your credit report. Disputing and removing errors, however, can save you a fortune.

I just came across a funky blog that had a great article entitled "Another Simple Way to Understand your Credit Report. This blog post was excellent. It talked about how someone with an excellent credit score can go down 100 points in one day with a single late payment. The author also spoke about how people with differing credit scores can end up purchasing the same asset and yet get financed quite differently resulting in one paying far more interest than the other.

This article should be read in light of the Fair Credit Reporting Act. ("FCRA"). You see, while FCRA is the basis for many of the issues raised in this blog post, many of the points made by the author do not relate to anything in FCRA specfically. For example, the late payment will penalize someone with a high FICO score far more than one with a mediocre FICO score. I recommend this article, highly.

I just read a similiar blog post at Fix My Credit Report Free where the debtor states:

"What options do I have once a collection has gone to court? The attorney representing the credit card company did not provide me with any information to verify that the debt is mine or how it was calculated. They say I've defaulted and am ordered to pay. Can I use a revised version of the debt validation letter to make them put up or shut up? What about attorney's fees? Can they add them to my judgment?"

The answer: The debtor's rights at this point are quite limited. With the judgment in place, the attorney can garnish the debtor's wages, haul the debtor into court for a creditor's examination to review the debtor's assets and even do a Writ of Execution which is where the debtor gets the court officer to take the debtor's assets. So now question becomes, what can the the debtor do to protect himself after a judgment has been entered. Remember, if the debt is a consumer debt, then the Fair Debt Collection Practices Act will always apply to the debt and govern the actions of the collectors, including the attorneys. Take heart, I have some ideas:

1. Be proactive and take the bull by the proverbial horns. Call the attorney and talk to her. Tell her that you want to pay the debt and are willing to do so. Just ask for an installment payment plan. As a collection attorney, I always admire debtors that recognize that they owe the debt and are willing to pay it. It shows a good attitude. It makes me want to "partner" with them to resolve their debt issue together. On the other hand, when I get a debtor who calls me with the tough guy attitude, I realize that cooperation will be next to impossible and simply go forward with all of the debt collection techniques that I can use. Being proactive and amiable is the number one method you can use to resolve a debt.

2. Motion to Installment payments. In Michigan, a debtor can file a Motion for Installment payments. Before you get too excited about this motion, please note that even if the court grants the debtor's motion to pay the judgment in installment payments, the order only protects wages. It does NOT stop a creditor from getting a Writ of Execution which means that a court officer can still come by your house and seize your car, your wallet, your jewelry, etc. How do you avoid a visit from the court officer? See #1, above.

3. Bankruptcy - This used to always be an option. While you have a Constitutional right to file for bankruptcy, the standards have recently been increased so that many debtors that would have otherwise had this right, may no longer qualify. If you think that this may be an option, in Michigan, I recommend Mark Shapiro and Stuart Gold. These gentlemen are not only my adversaries between 9 am. to 5 pm, but they are my friends outside of these hours. Mssrs. Shapiro and Gold are both not only bankruptcy attorneys, but they are assistant United States Trustees in the bankruptcy court. Since I am writing this blog post at 7:50 a.m. on a Sunday morning, right now, they are my friends. :)

4. Aggressive Asset Planning with an attorney - If you have substantial assets that you need to protect, you should consider hiring an attorney to discuss methods of protecting those assets. Some common methods include off shore bank accounts, trusts and re-titling assets to the names of yourself and your spouse. Sometimes, no amount of asset planning will stop an aggressive and seasoned collection attorney. But sometimes, it does.

I just read an excellent article by Elizabeth Fisher entitled You Have a Right to Dispute Your Credit Report. It is a quick and highly informative read. Ms. Fisher notes that her credit bureau contained a pile inaccuracies that painted her as a deadbeat. Clearly, she is not. She is not alone. Approximately 80% (yup..you read that right...80%) of all credit reports contain errors.

As consumers, we are so daunted and bullied by big business and their computers, we simply take it for granted that what they are telling our potential credit grantors MUST be accurate. I am here to tell you, that it ain't all true and it is affecting your financial condition. Here are some of the most common errors:

1. Mismerge - Your name is Jim Smith. The credit bureau might merge another Jim Smith's informaiton into your bureau. Forget that he has a different social security number. If he has derogatory information on his bureau, it gets posted to yours.

2. Debts that are out of statute. - You may have debts that are no longer collectible because they are out of statute. The credit bureau may still report this debt as owed even though it is not supposed to do so. Bad debts can be reported for up to 8 years. Prior bankruptcies are reported for up to 10 years.

3. Late payments that were not late.

Disputing these debts is easy. You can dispute any debt on your bureau on line with the credit reporting bureau. Once you dispute the debt, the bureau has 30 days to verify the debt with the credit reporter. If the bureau is unable to get verification of the debt, then it must remove the debt from your bureau. If the bureau gets a confirmation of the debt from the credit reporter, you can then sue both the credit reporter and the credit bureau. DO NOT LET THE CREDIT BUREAUS bully you into thinking its a long and arduous hassle to get a debt removed from you bureau because it is not. They are governed by the Fair Credit Reporting Act and the recent update called Fair and Accurate Credit Transactions Act (FACTA).

You have credit and you have rights. Don't be afraid to use either of these.

OK. I just saw this Youtube entry from some backwater redneck in a polyester suit. He was advising people that collection attorneys (referred to as bottom feeders) cannot collect debt that was charged off by a bank or credit union because the institution took a credit for it on its tax return. This is the second time that I heard this argument this year. This guy has inspired me to create a new category for my blog entitled Bad Collection info floating around the 'net.

Anyway, the bottom line is that just because the bank charged off your debt does not mean that you get to skate from the bill. You still owe the bill. The bank can sell the debt and you still owe the entire amount of the bill plus interest, costs and attorneys' fees if you get sued. Banks frequently charge off debt because they are governed by regulations and regulators that frequently look at their books and records. These regulations do not allow banks to keep non collectible debts on the banks books in the collectible column.

The FDCPA has nothing to do with this issue, no matter what Billy Bob from YouTube says. The FDCPA only protects you if the debt was a consumer debt and if new collector or debt owner attempts to collect it from you.

If you want advise on collecting a debt or how to work with a collector so you do not get bullied, call a lawyer. Yuk yuks like this guy are only going to get you into trouble.

Many years ago, I heard attorney Manny Neuburger talk about the power of using an offer of judgment in the defense of a Fair Debt Collection Practices Act claim. Manny is a Texas attorney and a giant when it comes to the defense of FDCPA cases. He said that one of the best defense techniques that a defendant can interpose in litigation is an offer of judgment.

Under an offer of judgment under FRCP 68, the defendant offers to give the Plaintiff a judgment for a certain amount. There are great tactical advantages to this. First, if the offer of judgment is accepted, the Defendant is able to cap its damages. Secondly, if the offer is accepted, the Defendant is also able to effectively end the litigation and curb further attorneys' fees in its defense. Thirdly, if the offer is NOT accepted, then the Plaintiff runs the risk of having to pay the Defendant's attorneys' fees if the Plaintiff does not get a judgment that is greater than the offer made in the offer of judgment. But wait...now there is more.

The United States District Court for Western District of Kentucky recently held in Tallon v Lloyd and McDaniel et al, (3:06CV-314-H) that when a defendant makes a good enough offer of judgment, that it can actually get a case dismissed on the grounds of mootness. That is great news for defense counsel in FDCPA litigation. In a nutshell, one of the defendants was a law firm that was accused of violating the FDCPA by sending garnishments to several banks in an area local to the Plaintiff/Debtor. The debtor sued stating that the blind garnishments violated the FDCPA. The court held that inasmuch as the Defendant offered to pay the Plaintiff the maximum that the Plaintiff could recover in this litigation, that the case should be dismissed on the basis of mootness. The court reasoned that the defendants have offered to satisfy all of the Plaintiff's monetary claims and the Plaintiff's claims are now moot. Even though the Plaintiff did not accept the Defendant's offer of judgment, the court appears to have made that acceptance on behalf of the Plaintiff anyway.

The court granted the Defendant's Motion to Dismiss the case by entering a judgment in favor of the Plaintiff for the $1,055; the amount of the offer of judgment. The court stated that it would enter the judgment pursuant to FRCP 68 which is the Offer of Judgment Rule. But, one question not answered by the court is whether it will now assess costs against the Plaintiff for failing to timely accept the offer. After all, the Plaintiff did not better its position in the litigation after failing to accept the offer. I suspect that there will be a subsequent motion to determine these costs.

I follow a number of blogs and read a large number of articles about the Fair Debt Collection Practices Act. Many of these authors tout the FDCPA as magic bullet with which a debtor can bully a collection agency. While the Act is intended to make collectors act as decent human beings, you should be aware that the Act also has the following limits:

1. The FDCPA applies only to consumer debts and not to commercial debts. A consumer debt is one that incurred for "personal, family or household use." A commercial debt is any debt that is not a consumer debt. This definition can make the determination of a debt somewhat tricky. For example, if one uses a credit card debt to purchase items for a home, it is a consumer debt. If one uses that same credit card to purchase items for one's office, it is arguably a commercial debt. In any event, just be aware, that the FDCPA does NOT apply to commercial debts.

2. The FDCPA does NOT apply to creditors collecting on their own debt so long as they did not acquire the debt when it was in default. For example, MBNA collecting on its own debt does not subject its collector type employees to the FDCPA. Moreover, if MBNA sells a credit card debt that is used for consumer purposes to another credit card company while the debt is NOT in default, the new credit card company is also not subject to the FDCPA. But, if MBNA sells the debt to the new credit card company while the debt is in default, the new company is subject to the FDCPA.

3. Governmental agencies are not subject to the FDCPA. Hence, neither the IRS nor your state or local governmental taxing authorities are bound by the Act's restrictions.

If you have find yourself being pursued by a debtor, take a moment and review these restrictions before dealing with any collector. Knowing your rights and their limits will give you a decided edge in your negotiations to resolve your debt issues.