Miscellaneous Questions

72-YEAR-OLD RAN UP THE CREDIT CARDS

The first thing you need to do is back off your mother. Remember, mom is always mom who wants to feel she is in charge of her life. The more you push her, the more she will resist your help.

For your mother to file for bankruptcy at her age is not a necessity. She has already quit making the payments, and will no longer be able to use her credit cards. Because the letters and telephone calls are not going directly to her she will not have to endure any harassment.

One remedy the creditor has to collect is to file a lawsuit against her. As she barely has an income and no equity in her houses, it would be tough for the creditors to collect.

When the creditors assess her financial situation as well as her age, they will probably back away from her and charge off the accounts.

Because your mother is uncomfortable filing for bankruptcy, analyze how much of a payment she can make on each credit card. For example, it may be only $10 per month per credit card. Whatever the amount is, help your mother write a letter to each of the creditors explaining her financial situation. Make the offer to pay $10 per month, with no more interest or fees being added. If the creditors agree to this arrangement, have them put it in writing and begin making the payments.

Your mother may feel better knowing she is paying at least something towards the bill.

Let’s hope mom learned her lesson.

SCAM ARTIST TOOK ADVANTAGE OF FATHER

Q. My 78-year-old widowed father fell prey to some scam artists who came to his home to repair his driveway. They befriended him, and before long convinced him to advance them cash for the driveway repairs that never happened.

As the weeks went by, these scam artists kept reappearing at my father’s house. He kept paying them cash for other repairs they promised to do. One day they convinced him to go to a department store and charge $15,000 worth of jewelry. Another time they convinced him to charge tires for their truck. Eventually $45,000 was run up in credit card purchases. The scam artists disappeared with all the purchases my father made.

Obviously he was not in his right mind or this wouldn’t have happened. Is he liable for these charges?

Nothing is more disheartening than hearing stories of elderly people being taken advantage of from scam artists with one thing in mind—to rip the elderly off.

Unfortunately your father could be liable for the repayment of the purchases. We would suggest that your father go to an attorney and have an attorney prepare a letter on your father’s behalf explaining the situation. Perhaps he could suggest a compromise or settlement that the creditors may accept. The creditors also may take pity on the situation and waive the charges. It is worth a try.

We’re sure your father is embarrassed about the situation and didn’t know how to get out of it. Being direct and up front with the creditors is your best chance of solving this problem.

DEFERRED PAYMENTS FOR SIX MONTHS

Q. I have seen advertisements offering merchandise you can purchase with payments deferred for up to six months. Is this a good way to go?

Deferred payment programs are enticements for you to make purchases. Always read the fine print. With deferred payments you may be charged interest during the six months that is deferred. You would owe more money on the balance when you begin making your payments because of the interest charges.

Also, if you violate any provision in the contract, the whole balance could become due. If you are late in making your first payment, additional fees could result.

Every company has its own policy on deferred programs. Make sure you understand what you are getting into before making any commitments.

CREDIT CARD OR DEBIT CARD

Q. Now that the banks have debit cards for VISA and MasterCard, which is the best way to purchase—using my credit card or debit card?

There are different uses for each of the cards. With your credit card you create a bill and the debit card automatically pays a bill by deducting funds from your bank account. The credit card has no connection with your bank accounts.

There are three reasons to use your credit card.

1. Your credit card account is not immediately debited. If you have a grace period with your account, you would have approximately 25 to 30 days to pay the charge with no interest. With the debit card your account is immediately affected.

2. You have more leverage with a credit card than with a debit card in settling disputes about purchases.

3. The liability for loss or theft is less on a credit card than on a debit card.

On the other side, the debit cards are often substituted for cash. They are more often compared with checks than with credit cards. When you use your debit card, proper point of sale or point of purchase equipment must be available to electronically transmit the information on your card to the bank. It also credits the merchant’s account immediately with the amount of the sale.

The debit card is not reported on your credit report. Your payment activity on your credit card will be reported monthly.

CUT-UP YOUR CARD AND RETURN IT

Q. I paid off my credit card and cut it up and threw it in the trash.

The credit card company sent me a bill for an annual fee of $25.

I threw the statement away because I was no longer using the card.

When I received a copy of my credit report, the credit card

company had a $25 balance and charged off my account, leaving a negative mark. I don’t feel I owe this because I no longer have the card. What can I do?

Never assume that your credit card account is closed unless you mail the credit card company your cut-up cards, requesting that your account be permanently closed.

Not using your credit card does not automatically close your account. If the terms of your agreement include an annual fee, it must be paid unless you canceled the card. The annual fee is usually added onto your credit card balance.

When you continuously ignored the statements, the credit card company eventually charged off your account.

Contact the credit card company and explain your misunderstanding of the annual fee. Explain that you cut the credit card up and threw it in the trash thinking that was all you needed to do to cancel the account. Note that there has been no activity.

Make a written arrangement with a supervisor to pay the $25 fee with the understanding that the account is closed and that the credit card company will remove the derogatory entry from your credit report. The credit card company is under no obligation to remove this, however speak to a supervisor about your situation and see if something can be worked out. If it refuses to remove the derogatory remark, you have two choices. Attach a statement to your credit report (the agency must allow you to do this), or pay the $25 and make sure the account is reported paid in full, even if the charge-off still appears.

CHECKING ACCOUNT DENIED

Q. I went to open a checking account and was denied. Does a bank report checking and savings accounts on your credit report? Why would I be denied opening an account?

Banks and savings and loans have their own internal reporting system that is reported to other banks and institutions. It is called Chex System. This information is not reported to credit reporting agencies.

If you have had a checking account closed because of your account being overdrawn and money is still owed to the bank, any bank that belongs to the Chex System will deny you opening a new account. When you are completing the paperwork in getting a new account, your name and Social Security number will be input into the bank’s system. If you are on the Chex System with a past problem on any account, you will be denied.

The best way to handle this situation is to find out what the problem is and which bank is reporting you.

Contact the bank and find out why you are being reported. If you owe the bank money, pay it off so you can open a new account. See if the bank will remove your name from the system once you have paid your ac count off.

BAD CHECK

Q. Recently I was shopping at a store and wrote a check for my purchase. The store turned my check down and said I was being reported by Telecheck. They gave me a telephone number to call. It appears there was a bad check for $15 that was never cleared. Does this show up on my credit report?

There are companies that many merchants contract with to protect the merchant from individuals who write bad checks. If you have an unpaid check that was written to a store that subscribes to one of these services, your name, account number of your check, and your driver’s license number are input into the system. If you go to another store that subscribes to the same service and you try to purchase by check, when the clerk inputs your driver’s license or checking account number into the cash register, your purchase will be denied. The merchant will give you the name and telephone number of the company that is refusing the cashing of your check.

When the company receives the check you wrote for insufficient funds, the company will send you a letter requesting the amount of the check plus additional fees. Once you have paid the company by cashier’s check or money order, your name will be deleted from its records and you will no longer have problems writing checks.

The companies who service the merchants with these bad check reports do not report you to the credit reporting agencies. The only time you will be reported to a credit reporting agency is when you refuse to pay the check and the company handling the check turns it over to a collection agency. The collection agency will then report you to the credit reporting agencies.

If the merchant is handling its own collection of a bad check and the merchant is not part of a check servicing company, your name is not re ported on any system. It is against the law to write bad checks and the merchant, after several attempts to collect, may elect to sue you. The merchant also may turn your check over to a collection agency, which will re port you to the credit reporting agencies.

CONSUMER CREDIT COUNSELING SERVICE ON MY CREDIT REPORT

Q. I went to Consumer Credit Counseling Service because I wanted to manage my bills better. None of my accounts were paid late but I wanted to make one payment to CCCS and have them pay my accounts. I went to refinance my house and was turned down because CCCS was noted on my accounts. What is the problem?

My credit rating is excellent.

Consumer Credit Counseling Service is a good company to use if you are having problems paying your bills. Many times CCCS can negotiate with the creditors to reduce your interest and payments.

The downside to this is that any creditors that CCCS pays or negotiates with on behalf of its clients, has the option to report this on your credit re port. Unfortunately, a notation that CCCS is assisting you with your payments can be viewed as a negative entry on your credit report.

When a lender is looking at your application for a refinance of your home, the credit entries that are noted with CCCS are viewed as bad as a bankruptcy. You will not be able to qualify for a loan offering the best rates.

A subprime lender may assist you with your refinance; however, you may not want to pay the higher rates.

My suggestion to you would be to cancel your arrangement with CCCS and contact all your creditors letting them know that you are taking over the payments of your accounts. See if the creditors will remove the entry stating CCCS from your credit report. If the creditors remove the entries and your credit report has no problems listed, you should be able to reap- ply for your refinance.

MY CREDIT CARD STATEMENT SAYS I CAN SKIP A PAYMENT

Q. On several occasions my credit card statement will indicate that I can skip the monthly payment for that month. Is this a good idea?

No! Never skip your monthly payment, even if the credit card company tells you that you can. Though you skip your monthly payment, the interest doesn’t stop and your balance increases.

Whenever a payment is skipped, the grace period that is allowing you to pay off your balance without interest becomes void. By losing the grace period and paying additional interest for the second month, an 18 percent interest rate rises to 26 percent on the final balance.

The only winner when you skip your payment is the credit card company.

DELINQUENT ACCOUNT SOLD THREE TIMES

Q. I had an account that was delinquent and eventually charged off. The company sold my account to another company which was listed on my credit report. The second company turned around and sold it to a third company and is also reporting this on my credit report. Do the three entries make the report look worse?

It is not uncommon for an original lender to sell the bad debt to an out side company after it is charged off. You can see the account listed on your credit report as being unpaid and transferred to other companies.

Each time it is the same debt being reported on your credit report and it should not be counted against you again.

No matter how many times the account is sold, the original date of last activity or payment on the account is what is measured for it to drop off the credit report. For example, if you had an account that was charged off in February 1992, the seven years would begin. In February 1999 the item will automatically be removed from the credit report.

It doesn’t matter how many times the creditor sells the account after the charge-off, the date of last activity is not reset.

Most bad debts, as well as good credit history, will be removed from your credit report seven years after the date of the last activity. Bankruptcies can remain for up to ten years from the date of filing.

STUDENT LOAN SOLD THREE TIMES

Q. I took out a student loan. The bank sold the loan to another bank. This happened three times. I continued making my payments but they were sent back to me indicating the account was sold. After three months I finally received a statement.

The new lender indicated that I owed three payments. Now my credit report says I paid late. What can I do?

Hopefully you saved the letters that the bank sent you refusing your payment because the loan was sold.

If you can find the letters and checks, make a copy of each and mail them certified mail with a return receipt to the new lender. In your letter request that the new lender update its records and remove the late payment entry from your credit report.

The bank should remove the negative entry off your credit report. If you are having problems getting the bank to agree to this, speak to a manager or supervisor. It wasn’t your fault the bank sold the loan and your payments crossed over.

When you have cleared up the matter, have the bank send you a letter stating its error and that it will be removing its negative entry from your credit report.

Request a copy of your credit report six weeks after the bank agrees to correct its files. If the credit report has not been changed then, make a copy of the letter from the bank and attach it to a letter to the credit re porting agencies requesting they update their records. You should receive an updated credit report within 45 days of your letter.

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