Predatory Lending and Credit

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1 Predatory Lending and Credit

2 Did You Know? Source: CFED Assets and Opportunities Scorecard

3 Here s Why... 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)

4 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

5 Predatory Lending Do Not Always Appear Expensive The Need The Ease The Talk

6 Where Predatory Lending Shows Up Payday Lenders Car Lots For-Profit Colleges Credit Cards

7 a 14-day, $500 payday loan with the maximum fee permitted by statute would have an APR of %. Source:

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10 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 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.

11 What do these have in common?

12 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

13 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

14 Signs of a Bad Auto Loan Dealer Kickbacks Junk Fees Yo-Yo Sales Buy Here, Pay Here No Option for Justice

15 For Profit College Student Loans State Attorney Generals in 14 States supported the S (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

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17 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

18 Consumer Financial Protection Bureau

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21 Your Credit

22 Case Study: John, Credit Score peaked at Paid a Questionable Collection Debt Because the Collector was Demanding. 435 Closed a Paid Off Credit Card in Good Standing. 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. Avoid Credit Score Dropping Activity!

23 What Impacts Your Scores

24 Impact on Credit Scores THE RISE AND FALL OF A CREDIT SCORE Score peaks based on good credit management Things Happen: 30,60,90 day lates Mortgage Default Divorce Bankrupcty Collection Identity Theft Recovery Time Score Bottoms Out Time Progression

25 Recency, Frequency and Severity Severity 30 day late payments are not as bad as 90 day late payments. Frequency how many late payments are recorded on the same account? How many instances are reported on the account? 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.

26 Your FICO Score 15% 10% 10% Payment History 35% Amount Owed Length of Credit History 30% New Credit Types of Credit Used

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

28 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.

29 Credit Repair Myths Myth: You Don t Have to Use Credit to Get a Good Credit Score Fact: 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 Report Fact: 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.

30 Fair Credit Reporting Act

31 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 OPT OUT Disclose your credit score to you upon request.

32 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.

33 Equifax.com Experian.com TransUnion.com ONLINE DISPUTE PROCESS

34 What to Do at Various Stages of Credit Scores

35 Credit Score Range

36 If you are here

37 If you are here

38 If you are here

39 If you are here

40 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 Review Your Credit Score Risk Factor Codes Determine Your Ability and Method to Pay Off Your Debt Payoff or Reduce Credit Cards Balances to 30% of Credit Limit Start and Keep the Good Stuff Going