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Author Topic: Would you seriously date someone who you knew had a bad credit score?  (Read 70070 times)
BayGBM
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« Reply #125 on: November 13, 2014, 09:33:16 AM »

Debts Canceled by Bankruptcy Still Mar Consumer Credit Scores
By Jessica Silver-Greenberg

In the netherworld of consumer debt, there are zombies: bills that cannot be killed even by declaring personal bankruptcy.

Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court.

The problem, state and federal officials suspect, is that some of the nation’s biggest banks ignore bankruptcy court discharges, which render the debts void. Paying no heed to the courts, the banks keep the debts alive on credit reports, essentially forcing borrowers to make payments on bills that they do not legally owe.

The practice — a subtle but powerful tactic that effectively holds the credit report hostage until borrowers pay — potentially breathes new life into the pools of bad debt that are bought by financial firms.

Now lawyers with the United States Trustee Program, an arm of the Justice Department, are investigating JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial, formerly known as GE Capital Retail Finance, suspecting the banks of violating federal bankruptcy law by ignoring the discharge injunction, say people briefed on the investigations.

The banks say that they comply with all federal laws in their collection and sale of debt.

Still, federal judges have started to raise alarms that some banks are threatening the foundations of bankruptcy.

Judge Robert D. Drain of the federal bankruptcy court in White Plains said in one opinion that debt buyers know that a bank “will refuse to correct the credit report to reflect the obligor’s bankruptcy discharge, which means that the debtor will feel significant added pressure to obtain a ‘clean’ report by paying the debt,” according to court documents.

For the debt buyers and the banks, the people briefed on the investigations said, it is a mutually beneficial arrangement: The banks typically send along any payments that they receive from borrowers to the debt buyers, which in turn, are more willing to buy portfolios of soured debts — including many that will wind up voided in bankruptcy — from the banks.

In bankruptcy, people undergo intense financial scrutiny — every bank account, bill and possession is assessed by the bankruptcy courts — to win the discharge injunction, which extinguishes certain debts and grants a fresh start. The heavy toll of personal bankruptcy, which can tarnish a credit report for a decade and put some loans out of reach, is worthless, bankruptcy judges say, if lenders ignore the discharge.

At the center of the investigation, the people briefed on it said, is the way banks report debts to the credit reporting agencies. Once a borrower voids a debt in bankruptcy, creditors are required to update credit reports to reflect that the debt is no longer owed, removing any notation of “past due” or “charged off.”

But the banks routinely fail to do that, according to the people briefed on the investigation, as well as interviews with more than three dozen borrowers who have discharged debts in bankruptcy and a review of bankruptcy records in seven states.

The errors are not clerical mistakes, but debt-collection tactics, current and former bankruptcy judges suspect. The banks refuse to fix the mistakes, the borrowers say, unless they pay for the purged debts. And many borrowers end up paying, given that they have so much at stake — the tarnished credit reports showing they still owe a debt can cost them a new loan, housing or a job. The Vogts, a couple in Denver, for example, paid JPMorgan $2,582 on a debt that was discharged in bankruptcy because they needed a clean credit report to get a mortgage.

There are many more who make payments on debts that they no longer legally owe, but never alert anyone because they do not realize the practice is illegal or cannot afford to litigate.

Humberto Soto, a 51-year-old unemployed hospital worker who went through bankruptcy in 2012, said he was almost one of those people who paid. In January, he was rejected for a Brooklyn apartment after the housing agency pulled his credit, which was tarnished by $6,411 on a Chase credit card, according to a letter from the agency, a copy of which was reviewed by The New York Times.

When he called JPMorgan, Mr. Soto said, he was told that the black mark would remain unless he paid. “It was either pay or lose the apartment,” he said. But after his bankruptcy lawyer explained the situation to the rental agency, Mr. Soto ultimately did not pay. (He got the apartment.)

JPMorgan and the three other banks declined to comment for this article, citing pending litigation in federal bankruptcy court in White Plains.

But the banks have offered defenses in court documents filed in conjunction with those lawsuits brought by Charles Juntikka, a bankruptcy lawyer in Manhattan, and George F. Carpinello, a partner with Boies, Schiller & Flexner. Those lawsuits — seeking class-action status on behalf of the borrowers — accuse the banks of bolstering the value of their debt by refusing to erase debts that were discharged in bankruptcy.

The banks have moved to throw out the lawsuits, arguing that they comply with the law and accurately report discharged debts to the credit agencies. Their lawyers have argued that the banks typically sell off debts to third-party debt buyers, and have no interest in recouping payments on the stale debts.

Some bankruptcy judges, however, have questioned whether the banks’ sale of the debts is precisely what the problem is.

Judge Drain, who is presiding over the cases, posited that the banks’ ability to sell the soured debts depends on ignoring the bankruptcy discharge in order to collect money from people who don’t have to legally pay it.

In July, the judge refused to throw out the lawsuit against JPMorgan, saying that the “complaint sets forth a cause of action that Chase is using the inaccuracy of its credit reporting on a systematic basis to further its business of selling debts and its buyer’s collection of such debt.”

During a hearing last year on a related case, transcripts show, Judge Drain said, “I might refer this, if the facts come out as counsel’s alleging, to the U.S. attorney,” for criminal prosecution.

Newly unsealed court documents reviewed by The Times illustrate how the banks handle payments from borrowers on stale debts, including those voided in bankruptcy. In contracts with debt buyers that were filed with the court, the banks outline the steps they will take when payments are made on charged-off debts.

In one contract between FIA Card Services, a subsidiary of Bank of America, and a debt buyer, the seller can keep any payments it receives 18 months or later after the sale. Before then, the contract shows, the lender will send any payments to the debt buyer.

Another contract between JPMorgan and a debt buyer allows the bank to keep a percentage — the exact amount is redacted in the court’s copy of the contract — of any payments sent in on the debts.

Those contracts shed light on the shadowy market of soured debts, including tens of billions of dollars that were voided in bankruptcy. Some banks sell off long overdue bills, which eventually wind up being extinguished in bankruptcy after the sale, for steeply discounted prices to debt buyers.

None of the banks specifically outline how much of their overdue loans are sold to debt buyers, but a review of publicly traded debts buyers like the PRA Group in Norfolk, Va., shows that the sums of bad debt bought and sold are vast. Since 1996 the company has bought more than 36 million accounts with a face value of $81.3 billion. Roughly 16 percent of those accounts — with a face value of $23.4 billion — are bankruptcy debts.

If the United States Trustee’s office determines the banks have violated bankruptcy law, say the people briefed on the investigations, they could audit the lenders and extract steep penalties.

The costs are more immediate for people like Bernadette Gatling, a 46-year-old hospital administrator whose credit report is still marred by Chase credit-card debts that were voided in bankruptcy three years ago. Since being laid off in March, Ms. Gatling said she has lost one job opportunity after another because potential employers pull her credit report.

“It’s just so unfair,” she said.
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« Reply #126 on: July 30, 2016, 06:14:30 AM »

Thinking About Co-Signing a Loan? Proceed With Caution
By ANN CARRNS

Parents and family members may think they are simply lending a helping hand by co-signing a car loan or credit card application for a child. But they are, in effect, agreeing to pay back the debt themselves — and they often end up doing so.

Well over a third of co-signers — 38 percent — had to pay some or all of the bill because the main borrower didn’t pay, according to a survey published this week by the card comparison site CreditCards.com. Credit scores dropped for more than a quarter of co-signers because the borrower paid late or missed a payment.

About one in six adults has co-signed a loan or credit card application for someone else. About half of those who co-signed did so on behalf of a child or stepchild. A common situation was someone over age 50 co-signing a child’s car loan.

“It can be a good way, if you trust the person, to give them a leg up,” said Matt Schulz, senior industry analyst for CreditCards.com, noting that his own father co-signed the loan for his first car when he graduated from college.

But co-signers need to be aware of the potential risks. When you co-sign a loan, you are contractually responsible to pay the loan if the borrower doesn’t, said Rod Griffin, director of public education with the credit bureau Experian.

In essence, Mr. Griffin said, you’re signing the loan because the lender thinks the borrower doesn’t qualify for some reason. “You’re vouching for that loan,” he said. “That’s a very high-risk thing to do.”

The survey found that auto loans accounted for half of all co-signings, and student loans accounted for 19 percent. Many private student lenders require co-signers, since students are usually borrowing the money based on their future earning potential, rather than current income, said Persis Yu, director of the Student Loan Borrower Assistance Project, a program of the National Consumer Law Center. But, Ms. Yu said, “A lot of people don’t realize what they’re getting into.” Parents or grandparents may think that they are providing a sort of character reference for the student, she said, rather than committing themselves to repaying the debt.

When someone asks you to co-sign a loan, consider his or her track record in paying back debt on time, said Dennis Johnson, a certified credit counselor in St. Louis with ClearPoint Credit Counseling Solutions. “Even if the person has the best intentions to pay it back and keep the loan in good standing,” he said, that person may be seeking a co-signer precisely because of trouble doing so in the past.

(For the survey, Princeton Survey Research Associates International surveyed more than 2,000 adults by telephone in mid-April and early May. The margin of sampling error is plus or minus 3 percentage points.)

Here are some questions and answers about co-signing a loan:

Can co-signing a loan affect my credit rating?

Yes. Even if the borrower repays the loan on time, the loan typically will appear as an obligation on your credit report, Mr. Griffin said. That means lenders will consider that liability when you apply for a loan yourself. If the additional loan makes your overall debt appear high compared with your income, Mr. Johnson said, you may end up paying a higher interest rate on your own loan.

Can I remove myself as a co-signer?

Once you co-sign a loan or credit card application, Mr. Griffin said, it’s difficult to get out of the commitment, especially if there have been any late payments. “It’s highly unlikely the lender would allow you to change that contract,” Mr. Griffin said, since the reason a co-signer is required is to reduce the lender’s risk.

One possible way to extract yourself from a co-signer obligation on a car loan or mortgage is to have the borrower refinance the loan solely in his or her name, Mr. Johnson said. Credit cards are more difficult, he said, but it’s possible that once the card is at a zero balance, you could ask to be removed from the account. The card company can then decide whether to allow the main cardholder to remain as the sole name on the account, or whether to close the account and have the borrower reapply for a card separately.

Some private student lenders promote the option to have co-signers released from their obligation after the borrower meets criteria like making a year or more of on-time payments. But in practice, it can be difficult to obtain a release on a student loan, according to the Consumer Financial Protection Bureau.

How can I protect myself as a co-signer?

The Federal Trade Commission suggests that you try to negotiate specific terms of your obligation before agreeing to co-sign. For instance, you can ask to limit your liability to the principal on the loan, and exclude any extra costs like late fees or court costs. If you’re successful, ask the lender to include a statement in the contract. For instance, the Federal Trade Commission suggests this language, “The co-signer will be responsible only for the principal balance on this loan at the time of default.”

After you co-sign the loan, you should stay in touch with the borrower to make sure payments are being made on time, Mr. Griffin said. If that’s not possible, you can contact the lender to verify the loan’s status, he said. You can also check your credit report periodically, to see if any late payments have posted. Mr. Johnson advises doing so at least every three to six months.
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« Reply #127 on: August 15, 2016, 04:03:21 AM »

How Millennials Became Spooked by Credit Cards
By NATHANIEL POPPER

Kids these days: They just aren’t pulling out the plastic like they did in the past.

Data from the Federal Reserve indicates that the percentage of Americans under 35 who hold credit card debt has fallen to its lowest level since 1989, when the Fed began collecting data in a standardized way, according to an analysis by The New York Times.

Some older Americans have also been shedding credit card debt since the financial crisis that began in 2008. But for no other age group has the decline in the proportion holding credit card debt been more rapid than it has been for young Americans — who are often referred to as millennials — the data from the Survey of Consumer Finances shows.

“It’s pretty clear that young people are not interested in becoming indebted in the way that their parents are or were,” said David Robertson, the publisher of The Nilson Report, a newsletter that tracks the payment industry.

Their reluctance could have lasting repercussions for millennials, as well as for the financial system and the economy. Early use of credit cards has, in the past, helped young Americans develop a comfort level with credit that can last a lifetime and lead to a succession of big purchases financed by debt. Without a substantial credit history, it is much harder to take out a home mortgage, for example.

“It will probably take them longer to get access to credit,” said Gregory Elliehausen, an economist at the Federal Reserve specializing in consumer finance. “In the meantime, their behavior and some of their habits will have already been formed.”

Over all, Americans’ use of credit cards has recently been creeping up again: Household debt in the United States increased by $35 billion, to $12.29 trillion, during the second quarter of 2016, a 0.3 percent rise from the previous quarter that was driven by credit cards and auto loans, according to a report released on Tuesday by the Federal Reserve Bank of New York.

Banks say that their credit card operations are running at full tilt, and that in recent months the number of people having trouble paying their bills has been at record lows.

But many younger people have been sitting on the sidelines, deterred by new laws passed after the crisis and big loads of student debt. They are also spooked by the temptation that credit cards offer to spend beyond one’s means.

Jason Towner, a 32-year-old who works at a private equity firm, cut up his last credit card, from Capital One, in 2010. He did not have any unruly debts, but he had just watched his father and sister close the family furniture store after a bank cut off their credit line in the middle of the financial crisis.

“I was seeing what was happening around the world, and what was happening in my backyard, and I was thinking, ‘This is not a great idea,’” Mr. Towner said recently.

The resurgence of overall credit card use in the United States over the last year or two has been driven largely by subprime borrowers, according to the Federal Reserve, which has not looked at the recent growth in borrowing by age.

But it is clear to economists who study payment patterns that millennials are gravitating toward payment methods that skirt both cash and credit. Why carry cash when you can whip out a debit card for the smallest transaction — a sandwich or a bottle of soda — or use an app like Venmo or an online payment service like PayPal? All of those typically draw funds directly from a bank account.

Mr. Elliehausen of the Federal Reserve said he expected the aversion to debt among young Americans to continue, potentially with a downside. Credit cards are frequently necessary for the bigger purchases — like washing machines and computers — that can make households more efficient and help the economy grow. And credit cards are usually an essential part of the credit history that allows someone to borrow to buy a house.

Only 37 percent of American households headed by someone aged 35 and under held credit card debt in 2013, the most recent year for which data from the Survey of Consumer Finances is available, down by nearly a quarter from immediately before the financial crisis. That statistic may undercount young cardholders to some extent, as it excludes people under 35 who live with their parents.

But more recent data has also suggested that millennials are using credit cards less than people of a similar age did in the past — and that they are taking on fewer auto loans and mortgage loans than people of similar age did before the financial crisis.

Rebecca Liebman, 23, graduated from Bentley University in 2015 with a load of student debt. She avoided getting a credit card until earlier this year, and did so then only because she kept hearing about how she would need to build up her credit history if she ever hoped to get a mortgage.

“I don’t want to use a credit card irresponsibly, and because of that, it’s scarier to use,” she said. “I grew up — I saw 2008 — I saw my dad get laid off. I don’t trust the financial market.”

Today Ms. Liebman is a founder of a financial literacy site for millennials, LearnLux, and the reluctant holder of a Discover card. Even after getting the card, it took her five months to overcome her ingrained aversion to debt and make her first purchase — a physical wallet.

She understands what the aversion will mean for her and for her customers.

“It’s going to make me buy a home a lot later in life,” Ms. Liebman said. “It think it will impact a lot of big decisions and push them further out. There are some things that are going to be specific to our generation around financial decision-making for sure.”

The reasons for the shift are varied: Like Ms. Liebman, many young people carry burdensome loads of student debt, making it hard for them to take on any more debt — and giving them a sour taste in their mouths when it comes to credit of any sort. The average American under 35 now has $17,200 of student debt, 182 percent more than Americans of the same age had in 1995, the Fed data shows.

On a more practical level, laws passed after the financial crisis made it much harder for younger people to secure cards unless they could prove they had the income to pay the bills. The tents that credit card companies used to pitch all over college campuses — offering students free T-shirts when they signed up for cards — have largely disappeared.

Then there are the young professionals who are able to get a card, but have seen the strain that debt put on their families and friends during the financial crisis.

Mr. Towner, whose job in private equity involves lending money to small businesses, is a prime example. To him, the risks involved with debt outweigh the benefits, so he tends to use Venmo and PayPal, or, whenever possible, cash. When he bought his apartment in Berkeley, Calif., he chose a foreclosure and paid with money he had in the bank.

“I don’t want to go out and buy, buy, buy, even though that’s what society wants me to do,” Mr. Towner said. “I want to save and invest for the long term.”
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Doug_Steele
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I'm totally Brolic, bro!


« Reply #128 on: August 15, 2016, 07:15:49 AM »

I hope Methyl Mike learned his lesson.  Cheesy
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