Predatory Lending

and Credit

Did You Know?

Source: CFED - 2014 Assets and Opportunities Scorecard

• Credit reports may contain reporting

errors that negatively impact credit

scores

• Unknown derogatory accounts can be

reported at any time

• Predatory loans gone bad

• Most people don’t know the process of

remediation (do it yourself credit repair)

Here’s Why...

Discussion Topics:

• What types of lending practices are considered predatory and how to avoid them

• Where to go for help to get unraveled from fraudulent lending practices

• How to manage and maintain control of your credit

• The specific steps to take to improve your credit scores

Predatory Lending Do Not Always Appear Expensive

The Need

The Ease

The Talk

•Payday Lenders

•Car Lots

• For-Profit Colleges

•Credit Cards

Where Predatory Lending Shows Up

391.07a 14-day, $500 payday loan with the maximum fee permitted by

statute would have an APR of 391.07%.

Source: http://www.dfi.wa.gov/consumers/education/payday_loans.htm

Your Rights as A Washington Resident

• Any payday loan obtained from a lender not licensed with the DFI, and

not repaid to the lender may not be collected by lender and the lender

may not pursue action in Washington State to collect the debt. See RCW 31.45.105.

• You have the right to change your mind about the loan within one day.

• You have the right to know all of the costs involved. You also have the

right to a payment plan.

• A payday lender may not threaten criminal prosecution as a method of

collecting a past due loan.

What do these have in common?

Yo-Yo Sales• You negotiate a car deal and drive the car home

• Dealer calls back and says your financing didn’t go

through and that they have a different financing package

• The “new” financing is usually more expensive than what

was originally quoted

Ever experience any of this?

• The dealer threatens action to retrieve the car

• The trade in could not be returned or was already sold

• The down payment was non-refundable

• The dealer charged a rental fee, usage fee, or restocking

fee for the time the customer had the car

• The payment for taxes, title and fees could not be returned

Dealer Kickbacks

Junk Fees

Yo-Yo Sales

Buy Here, Pay Here

No Option for Justice

Signs of a Bad Auto Loan

For Profit College

Student Loans

State Attorney Generals in 14 States

supported the S. 2204 (Sept 2014)

Honorable Richard J. Durbin

Proprietary Education Oversight

Coordination Improvement Act

Arkansas, Connecticut, Illinois, Iowa,

Kentucky, Maine, Maryland, Mississippi,

Missouri, Nevada, New Mexico,

Oregon, Pennsylvania, Tennessee

http://www.nclc.org/issues/student-loans.html

Debt Collectors

• Can’t lie about the amount owed

• Can’t say that the person is an attorney

• Can’t make false threats to have you arrested

• Can’t threaten to do things that cannot legally

be done

• Can’t threaten to do things that the debt

collector has no intention of doing

Consumer Financial

Protection Bureau

http://www.consumerfinance.gov/complaint/

Your Credit

Case Study: John, Credit Score peaked at 712

Avoid Credit Score Dropping Activity!

435

620

680

Paid a Questionable Collection Debt Because the Collector was Demanding.

Requested Two Other Creditors to Reduce His Credit Limit.

Consolidated His Remaining Credit Card Debt onto One Card.

Started Making Installment Payments on an old Collection Account.

Closed a Paid Off Credit Card in Good Standing.

What Impacts Your

Scores

THE RISE AND FALL OF A CREDIT SCORE

Score peaks based on good credit management

Score Bottoms OutImp

act

on

Cre

dit

Sco

res

Time Progression

Recovery Time

Things

Happen:

• 30,60,90 day lates

• Mortgage Default

• Divorce

• Bankrupcty

• Collection

• Identity Theft

Recency, Frequency and Severity

Recency – how recent was the derogatory mark reported by the creditor? A mark reported last month

has greater impact than a mark reported last year.

Frequency – how many late payments are recorded on the same account? How many

instances are reported on the account?

Severity – 30 day late payments are not as bad as 90 day late payments.

Your FICO Score

35%

30%

15%

10%10% Payment History

Amount Owed

Length of Credit History

New Credit

Types of Credit Used

RISK SCORE REASON CODES – Summary of Factors

Account payment history too new to rate.

Amount owed on collections filed.

Amount owed on revolving accounts are too high.

Amount past due on accounts.

Derogatory public record or collection filed.

Length of time installment loans have been established.

Credit Risk Score Reason Codes are only provided on credit reports that are published with credit scores.

RISK SCORE REASON CODES – Summary of Factors

Proportion of loan balances to loan amounts is too high.

Serious Delinquency.

Time since derogatory record or collection is too short.

Too many inquiries in the last 12 months.

Too many revolving accounts.

Too few accounts currently paid as agreed.

Credit Risk Score Reason Codes are only provided on credit reports that are published with credit scores.

Credit Repair Myths✓ Myth: You Don’t Have to Use Credit to Get a Good Credit ScoreFact: The credit score engines look at recent credit activity. If you want to raise the score, you must have current activity

✓ Myth: Paying off a Debt Removes is from Your Credit ReportFact: The account does not come off the report just because you paid it. It will stay on as long as the statute of limitations allow.

✓ Myth: Putting a 100-word Statement on Your Credit Report will Improve Your Score on an Account You Are Disputing

Fact: The Credit Scoring Engines do not take this into account when calculating your score.

Fair Credit Reporting Acthttp://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act

• Disclose your credit file to you upon request.

• Limit access to your information.

• Get your consent before providing your information to an

employer.

• Investigate disputed information.

• Correct or delete inaccurate information.

• Delete outdated information.

• Remove your name from marketing lists upon request.

• 1-888-5-OPT OUT

• Disclose your credit score to you upon request.

Fair Credit Reporting Act

Write the Right Letters

Correction Letter

To request a correction or an update to an account that is being reported wrong.

Deletion Letter

To request the complete removal of an account that should not appear at all.

Addition to Credit Report Letter

To add positive information to your credit report that is currently not being reported.

Debt Validation Letter

For every collection agency that is asking you to pay a debt, make a written request for them to validate the debt first before agreeing to anything.

ONLINE DISPUTE PROCESS

Equifax.com Experian.com

TransUnion.com

What to Do at Various

Stages of Credit Scores

300 410 520 630 740 850

Credit Score Range

300 440 460 480 500 520

If you are here…

520 540 560 580 600 620

If you are here…

620 640 660 680 700 720+

If you are here…

720 740 760 780 800 850

If you are here…

Do it Yourself Credit Improvement:

Review Your Credit Report and Scores:

annualcreditreport.com

Correspond with Creditors and the Credit Reporting Agencies

Write Dispute Letters Regarding Unfamiliar and Incorrect Accounts

Payoff or Reduce Credit Cards Balances to 30% of Credit Limit

Determine Your Ability and Method to Pay Off Your Debt

Review Your Credit Score Risk Factor Codes

Start and Keep the Good Stuff Going