Archive for the ‘contracts’ Category

What exactly makes assigning AU status legal? Or not?

Wednesday, March 26th, 2008

I may need to explain a bit more about the legality of assigning AU status:

1.) If permitted by the contract terms(note those words), an account holder can assign AU status to anyone. One is not limited to immediate family members or those who are employed by the account holder, as the case may be unless the credit contract agreed to by the parties specifically states otherwise.

While I personally see an account holder’s assigning AU status to anyone as being “risky” and its extension to family members/acquaintances as being an outmoded way to build credit (it’s still useful in business for staff access to the business’ credit lines), that does not mean such move is illegal. It isn’t…if it stops here…but…

2.) The illegal action (if NOT permitted by the contract terms) is SELLING and/or LEASING/SUBLEASING that access to a third party.

3.) The remarks I made, and have made in the past, pertain to Situation #2:

Leasing/subleasing/selling that AU status, either directly or through a broker, is the “no-no” if not expressly permitted under, and according to, the terms of the contract with the credit issuer . If such an action is not permitted outright or such original contract with the credit grantor is silent as to whether “selling” AU status is permitted? Then any such action is in breach of contract and can easily rise to charges of theft, fraud, and other crimes if the credit grantor would wish to pursue them.

At the very least, this situation would leave the account holder liable for the breach. That, in turn, could result in rate jacking, “calling” the loan (demanding immediate payment in full), and lawsuits. The third-party broker and the AU “for pay” would likely also end up in court and made to account for their actions by the original credit issuer (and possibly any other creditors who relied on the “tainted” credit reports to make credit decisions in the “AU for a fee”‘s favor).

Not a pretty picture, is it?

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, credit scoring, law and the courts, scams and frauds, seasoned tradelines scam | Comments Off

Someone is a bit defensive about "seasoned trade line" sales…and should be.

Tuesday, March 25th, 2008

But not for the reasons she thinks apply…

It seems that a certain barking beagle from WV is howling about “other sites” once again at a certain “friendly”, “professional” credit repair board. Her remarks in this post are rather, shall we say, “revealing” of a lot more than she might wish:

….I felt it was worth mentioning that the AU status and the selling of trade lines is what the main concern seems to be with other forums pro-FICO 08 crowd. Those people are making it out to be a shady dirty unethical way of improving your credit scores …

No, indeed it does not matter how anyone got into a mess…although it seems that someone is rather on the defensive here. Why?

Whether helping your scores by disputing a tradeline, by filing suit , or by buying a seasoned tradeline, no one here makes a judgment about the character of any guest or member here for doing what they feel they need to do.

Uh, look at what I bolded : Yes, it’s legal to dispute a trade line, to file suit (if a CoA exists)…but…

That “buy a seasoned tradeline” bit? I would say there are both ethical and legal questions to this one:

1.) Creditors did not consider such actions (a form of underground reselling of access rights to a credit line without owning such account, which is what an AU (authorized user) is) when drawing up the contracts offered.

2.) Therefore, the creditor is suddenly facing exposure to unplanned-for losses and definently do not get a “cut” of the proceeds. A risk they may not even know they have been exposed to until it’s too late.

3.) The owner of the “seasoned trade line”? All they “own” is access rights and concurrent liability for any monies borrowed under the terms of the contract as agreed to. Since the “selling” of the AU status (access without liability) was NOT part of the contract agreed to between themselves and the creditor, the debtor (account holder) has NO legal right to resell this access to anyone.

4.) By reselling the access without the consent of the creditor to do so, they then are not only in breach of contract but they are fraudulently collecting monies that they are not entitled to under contract.

That’s called “theft” and “fraud” around these parts.

5.) The reseller (the “seasoned trade lines” broker) is re-selling something that the seller did not have the right to sell to begin with. In other words, they are, for all intents and purposes, selling stolen property. In the vernacular, they are “fencing” the stolen goods. They are also receiving stolen property. (Yes, a debt is property.)

All of that is against the law, too.

6.) The buyer of the “seasoned trade line” is therefore an accessory to theft and a purchaser of stolen goods. And, no, one cannot argue lack of knowledge that the item is stolen…the buyer of the trade line goes into the deal knowing full well what they are buying and therefore has no defense in court AND is risking not only losing their money to “buy” the trade line, but fines, legal defense fees…and their not-so-hard-earned “repaired” credit!

Never mind finding themselves ending up on the wrong side of “breach of contract” and possible criminal fraud charges from every single creditor that the “repaired by purchase” trade line defrauded by presenting the debtor in a better light than they really deserved to be.

For a pittance. You don’t really think that a reseller such as our howling beagle’s CRO friend hands over the entire fee (or even the bulk of it) to the one who sold the AU access to the good trade line(s) they worked so hard to earn…do you? :wink:

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, credit scoring, idiotic "experts", law and the courts, scams and frauds, seasoned tradelines scam | Comments Off

FICO08 seems to be stymied…

Monday, March 24th, 2008

It seems that someone at “Infinite Credit” is not-so-secretly gloating over the apparent decision of some CRAs to tell “Fair Isaac” to “Take ‘Fico ’08″ and Shove It!”. Or, rather is it really their decision because they are being so “considerate” toward consumers? Or, is it something else:

…[R]ead the Equal Credit Opportunity Act. Not saying that the CRA’s won’t allow the model to be applied to their data (EX may) rather, only that the model is invalid as presented. Creditors may use it and if they do, I can foresee some litigation…

The truth: The model may or may not be “flawed”–we don’t have enough information to know that and we won’t get it.

No matter, though: Fear of litigation is what’s stopping the CRAs from accepting “FICO08″. This has NOTHING to do with the validity–or lack of it–of authorized user status and really has nothing to do with the Equal Credit Opportunity Act, either. The reason I say this is simple:

AUs are NOT parties to the credit contract, but are simply given permission to access the credit line as proxy for the account holder(s) by the account holder (owner) AND the creditor is willing to accept this proxy access as part of the contractural terms.

There is NO law that requires any creditor to allow for such proxy access. All the ECOA does is require that everyone have the same opportunity to access credit in their own name.

“Equal Credit OPPORTUNITY” does NOT equal the opportunity to go “piggybacking” on the account of an actual party to the contract…no matter how the ‘piggybacking’ is justified. The fact that some family members who might benefit from this process would lose out if the AU status is “deep-sixed” by creditors is of no importance here.

The ECOA also does NOT require that this status and its benefits continue to be made available forever to those who already have it. In other words, AU status can be revoked, as long as it’s taken away from everyone!

So where’s the ‘beef’? Everyone suffers equally…Oh…someone’s “seasoned tradelines business” might suffer just a bit if FICO08 did manage to take hold? :grin:

Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Creditors, FICO08, contracts, credit repair frauds/fraud, scams and frauds, seasoned tradelines scam | Comments Off

Is "FICO, '08" discriminatory against AUs?

Monday, December 24th, 2007

Simple answer: No, based on what we can know at this time.

FACT: FICO ’08 ‘s “dirty details” are NOT totally “fixed” nor fully accessable (or, at least as accessible as they ever are) yet, so the arguments on discussion boards such as this thread here are, at best, very premature.

The main argument by the “Score the AUs? YES!” crowd is here: The FICO scoring algorithm changes are allegedly discriminatory on their face per the ECOA (Equal Credit Opportunity Act) and the FCRA (Fair Credit Reporting Act ) because these standards allegedly exclude the Authorized User (AU) from having those tradelines counted in the scoring. There might be some basis for the charges IF Fair-Isaac, in response to these whiners, makes “exceptions” for some AUs and not others. This is not likely.

Yes, the law permits the assignment of the AU status to anyone by any account holder at this time if the credit issuer allows for AUs. However,  it is not a guarantee that the “whiners” will win their argument now. Here’s why:

a.) While lenders are permitted per the law to create AU status on a credit account, they are NOT required to allow for any such thing as long as this policy is applied to everyone !

b.) An account counts in the scoring algorithm only if it is reported to a CRA by the credit issuer.

c. ) Nobody–and I mean nobody–is required to report squat to a CRA.

Therefore…

d.) All the credit issuer need do to avoid the “crybabies” who would not like the AU status to be rendered obsolete is…not report anything at all about any account to any CRA!

If they do that, there is no discrimination per the law, since everyone–primary account holders, joint account holders, and AUs– suffers equally if this is what takes place.

CRAs and creditors are known to take the path of least resistence..and guess what that might be if the “babies” fuss too much? That’s right… :twisted:

The “Law of Unintended Consequences” would be enforced once again.

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Posted in Authorized User, Commentary., Credit Issuance., Credit repair., Credit reporting and CRAs, Legislation, contracts, credit repair frauds/fraud, credit scoring | Comments Off

Payday loan limtiations for military personnel: A bad thing?

Saturday, December 15th, 2007

Or, is the new payday lender interest limitations in Federal law actually a good thing by making these loans essentially impossible to get for military personnel, at least in UT. The “Deseret Morning News” article (via. “Overlawyered” ) gives a clue as to what is going on:

 

Payday lenders tells military ‘no’

Companies refusing loans at mandated lower rate

By Lee Davidson
Deseret Morning News

Published: October 2, 2007

© 2007 Deseret News Publishing Company | All rights reserved

 

Utah payday lenders began refusing Monday to make loans to members of the military rather than give them much lower rates mandated by a new federal law. That new law,…caps the annual interest on payday, car title or tax refund anticipation loans at 36 percent annually for members of the military and their families. A 2005 Deseret Morning News series found payday loans here averaged a whopping 521 percent interest, and car title loans averaged 300 percent.

Cort Walker, spokesman for the payday loan industry’s Utah Consumer Lending Association, said Utah payday lenders simply cannot make a profit… so they will decline to do business with members of the military.

“At 36 percent annual percent rate, the total fees we could charge are $1.38 per $100 for a two-week loan. That is less than 10 cents a day….

“Payroll advance lenders could not even meet employee payroll at that rate, let alone cover other fixed expenses and make a profit,” [F]or such lenders to reach the break-even point they must charge about $13.70 per $100 loaned for two weeks.

Walker said Utah payday lenders will now ask potential customers if they are active members of the military. If they are, “we cannot offer them a loan,” he said.

While refusing loans to someone based on such things as race or religion would violate civil rights laws, the payday loan industry’s lawyers say refusing service to the military does not violate laws…

Walker said, “This law will force the members of the military to choose between more expensive alternatives like bounced checks or overdraft protections and even unregulated and more risky alternatives…”

And when is a payday loan the cheaper alternative??

Linda Hilton, a payday loan industry critic and director of the Coalition of Religious Communities, disagrees.

“It may be taking an option away from the military, but it’s taking away their worst option and leading them toward others,” she said….

The Pentagon issued Monday a press release saying it hopes the new 36 percent cap will help…and said payday and car title loans “often lead to a cycle of ever-increasing debt” as families cannot repay them on time, and take out more loans to cover earlier loans.

“The protection the regulation offers is not a wall preventing a service member from getting assistance, rather it is more like a flashing sign pointing out danger and directing the borrower to a safer way of satisfying immediate financial need,” said Leslye A. Arsht, deputy undersecretary of defense for military community and family policy….

The State of Utah took action only after the military complained about payday lenders. And no wonder: These outfits cluster like cockroaches in a kitchen around military bases, taking advantage of the desperation of military personnel and their dependents who often literally live hand-to-mouth. These scumbags also rely on the “persuasive” power of the potential of a serviceman’s/servicewoman’s getting into real trouble with the “brass” in order to collect on the debt (most of us would call it extortion and intimidation).

Here is the “Servicemembers’ Civil Relief Act” of 1993′s pertinent section:

Subtitle F–Other Matters
SEC. 670. LIMITATIONS ON TERMS OF CONSUMER CREDIT EXTENDED TO SERVICEMEMBERS AND DEPENDENTS.

(a) Terms of Consumer Credit.–Chapter 49 of title 10, United States Code, is amended by adding at the end the following new section:

“Sec. 987. Terms of consumer credit extended to members and dependents: limitations
“(a) Interest.–A creditor who extends consumer credit to a covered member of the armed forces or a dependent of such a member shall not require the member or dependent to pay interest with respect to the extension of such credit, except as–
“(1) agreed to under the terms of the credit agreement or
promissory note;
“(2) authorized by applicable State or Federal law; and

“(3) not specifically prohibited by this section.

“(b) Annual Percentage Rate.–A creditor described in subsection (a) may not impose an annual percentage rate of interest greater than 36 percent with respect to the consumer credit extended to a covered member or a dependent of a covered member.”

And, how is the law applicable to payday loans? Well…

” “(e) Limitations.–It shall be unlawful for any creditor to extend consumer credit to a covered member or a dependent of such a member with respect to which–
“(1) the creditor rolls over, renews, repays, refinances,
or consolidates any consumer credit extended to the borrower by the same creditor with the proceeds of other credit extended to the same covered member or a dependent;

“(2) the borrower is required to waive the borrower’s right
to legal recourse under any otherwise applicable provision of
State or Federal law, including any provision of the Servicemembers Civil Relief Act;

“(3) the creditor requires the borrower to submit to
arbitration or imposes onerous legal notice provisions in the
case of a dispute;

“(4) the creditor demands unreasonable notice from the
borrower as a condition for legal action;

“(5) the creditor uses a check or other method of access to
a deposit, savings, or other financial account maintained by the
borrower, or the title of a vehicle as security for the loan obligation;

In other words, this law prohibits charging interest in excess of 36% per annum and defines what the covered loan types are: Payday loans and car title loans.

And 36% per annum is NOT “enough” on a two-week loan? Those payday lenders can take their s*it and shove it! :evil:

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Posted in Credit Issuance., contracts, miliary personnel, payday loans | Comments Off

Payday lenders and military personnel: A case of "The Law of Unintended Consequences"?

Sunday, October 21st, 2007

Or, is the new payday lender interest limitations in Federal law actually a good thing by making these loans essentially impossible to get for military personnel, at least in UT. The “Deseret Morning News” article (via. “Overlawyered” ) gives a clue as to what is going on:

 

Payday lenders tells military ‘no’

Companies refusing loans at mandated lower rate

By Lee Davidson
Deseret Morning News

Published: October 2, 2007

© 2007 Deseret News Publishing Company | All rights reserved© 2007 Deseret News Publishing Company | All rights reserved

 

Utah payday lenders began refusing Monday to make loans to members of the military rather than give them much lower rates mandated by a new federal law. That new law, which took effect Monday, caps the annual interest on payday, car title or tax refund anticipation loans at 36 percent annually for members of the military and their families. A 2005 Deseret Morning News series found payday loans here averaged a whopping 521 percent interest, and car title loans averaged 300 percent.

Cort Walker, spokesman for the payday loan industry’s Utah Consumer Lending Association, said Utah payday lenders simply cannot make a profit if they charge only 36 percent — so they will decline to do business with members of the military.

“At 36 percent annual percent rate, the total fees we could charge are $1.38 per $100 for a two-week loan. That is less than 10 cents a day,” Walker said.

“Payroll advance lenders could not even meet employee payroll at that rate, let alone cover other fixed expenses and make a profit,” he said. Walker added that for such lenders to reach the break-even point they must charge about $13.70 per $100 loaned for two weeks.

Walker said Utah payday lenders will now ask potential customers if they are active members of the military. If they are, “we cannot offer them a loan,” he said.

The payday loan sharks…eh…lenders …can’t make money at 300% per annum plus?? Something is wrong here…and it starts with picking on our servicemen and women!

Walker said, “This law will force the members of the military to choose between more expensive alternatives like bounced checks or overdraft protections and even unregulated and more risky alternatives, like offshore Internet lending.”

And the military will then stop that, too. The military HATES it when servicemen and women get into financial trouble. Payday loan places, which have clustered around military bases like flies around shit, have been the source of more grief–and loss of manpower. The reason? Military personnel who end up with bad credit ratings/in financial trouble may are not able to get security clearances nor can be deployed overseas. The concern is that military personnel in financial trouble are likely to take bribes or sell out to the enemy…and this has happened!

All the Pentagon is doing is trying to “protect their investment” in personnel and training by helping military personnel (and their families) keep out of debt and available to deploy. Besides, at a 36% rate of interest, the banks can make money…lots of it! Even (the apparently late) “Aspire” card did not ask for a much higher interest rate than that…and we know the type of thieves…eh, businesspeople that own CompuCredit!!

“The protection the regulation offers is not a wall preventing a service member from getting assistance, rather it is more like a flashing sign pointing out danger and directing the borrower to a safer way of satisfying immediate financial need,” said Leslye A. Arsht, deputy undersecretary of defense for military community and family policy.

Subtitle F–Other Matters

SEC. 670. LIMITATIONS ON TERMS OF CONSUMER CREDIT EXTENDED TO
SERVICEMEMBERS AND DEPENDENTS.
(a) Terms of Consumer Credit.–Chapter 49 of title 10, United States
Code, is amended by adding at the end the following new section:

“Sec. 987. Terms of consumer credit extended to members and dependents: limitations

“(a) Interest.–A creditor who extends consumer credit to a covered
member of the armed forces or a dependent of such a member shall not require the member or dependent to pay interest with respect to the  extension of such credit, except as–
“(1) agreed to under the terms of the credit agreement or
promissory note;
“(2) authorized by applicable State or Federal law; and
“(3) not specifically prohibited by this section.

“(b) Annual Percentage Rate.–A creditor described in subsection
(a) may not impose an annual percentage rate of interest greater than 36 percent with respect to the consumer credit extended to a covered member or a dependent of a covered member.”…
“(e) Limitations.–It shall be unlawful for any creditor to extend
consumer credit to a covered member or a dependent of such a member with respect to which–
“(1) the creditor rolls over, renews, repays, refinances,
or consolidates any consumer credit extended to the borrower by
the same creditor with the proceeds of other credit extended to
the same covered member or a dependent;
“(2) the borrower is required to waive the borrower’s right
to legal recourse under any otherwise applicable provision of
State or Federal law, including any provision of the
Servicemembers Civil Relief Act;
“(3) the creditor requires the borrower to submit to
arbitration or imposes onerous legal notice provisions in the
case of a dispute;
“(4) the creditor demands unreasonable notice from the
borrower as a condition for legal action;
``(5) the creditor uses a check or other method of access to
a deposit, savings, or other financial account maintained by the
borrower, or the title of a vehicle as security for the loan obligation;

See especially U.S. C. Chapter 49, Title 10, Subtitle F, §670.987e(5). That is the applicable subsection covering payday and title loans and making them subject to the interest rate restriction.

Posted in Commentary., Credit Issuance., Creditors, Legislation, contracts, miliary personnel, payday loans | Comments Off

The "grace period" has not expired, but they want the "late fee"?

Friday, August 31st, 2007

Read your contract. You might find out something you don’t want to know. :shock:

There is an incident on another site in which the poster mentions that, as a test, they decided to pay late on a loan (for an auto lease). The creditor–a well-known credit issuer–decided to be aggressive and have the in-house collections call them only a few days into the fifteen-day “grace” period. The poster decided to essentially ignore that, and got a default/cure letter a few days later asking for payment, including a late fee that was allegedly ten bucks higher than stated in the contract.

They have paid, but now want to sue the creditor for breach of contract? Uh…not so fast:

Before this person–or anyone–should get all hot and bothered by what seems to be a creditor pulling a “fast one”, they should get out that contract again. And READ it, parsing it line by line…not just the sections that they think apply to the situation. There is a good reason for this: One cannot necessarily take the clauses of a contract in isolation, but must read them in the context of the entire document.

To use this situation as an example: The default clause in most consumer credit contracts can be triggered by almost anything; just the fact the payment was late was enough to trigger the default provisions and/or collection activity.

The poster here seems to think that a “grace period” means “no collection activity and no penalty”. Not so: All a “grace period” is is a contractural nicety which acknowledges that conditions beyond the control of the borrower may make the payment late–such as slow mail delivery–and that the creditor is willing to cut them some slack before considering the contract breached and/or assessing penalties. It does not mean that they cannot have their “nice” CSR begin to call the borrower asking for payment; the borrower may have forgotten (legitimately) about the payment due and they need a reminder. It certainly makes sense for the creditor to try to find out what’s going on…and that’s what the “early” call was about (the customer service skills–or lack thereof–of the CSR are irrelevant).

The refusal by the borrower to tell them what’s up could, under the contract, constitute an outright refusal to pay the amount due and automatically results in contractural default. In this case, apparently it did…and made the late fee due and payable immediately. The higher amount? It could have resulted because more than one penalty was assessed in the same category and the letter stated the aggregate only.

Or, the contract itself called for the penalty to be higher once a default was declared.

Or, there was a “bill stuffer” amendment to the contract which changed the fee amount…and that has been overlooked, “conveniently” or otherwise by our “pissed off” consumer.

There is no way of knowing…unless the borrower goes back and reads the f*in’ contract! And, if necessary, asking the creditor to clarify for them the applicable portions of such contract and the reasons for the default before doing anything else.

Posted in Collections, Creditors, Debt Collection., contracts | Comments Off

If you sell something valuable, a contract might prevent problems…

Saturday, July 21st, 2007

such as this Debtorboards member has. This is the situation of a “nawlinjoe”:

I sold a car to a young man and after three months, his mother wanted him to return it. After I refused, I was served with a small claims suit which they won. Now after two years, the judgement shows up on my cr, TU & EX. How do I approach getting this off my cr, it is showing not paid and its been paid in full. Would just disputing it as “not mine” work?

It seems that “nawlinjoe” has his eyes on the wrong question: They want to get rid of the Public Record TLs… all well and good. But the real question, brought up in the thread, is “How in the blue bloody blazes could you lose a Small Claims case for damages based on simply not taking back the stupid car?”

I have an idea about this: “Is there any record of this poster’s having drawn up a sales contract for the vehicle??” It seems that there was no contract to cover things that could go wrong…

Like…

1.) Not asking cash on the barrelhead for the car. Unless the car were a real old ‘junker’, it’s highly unlikely a teenager could come up with the cash to do much more than a down payment; most of us can’t. So, a contract may well call for the car to be held onto by the seller until the buyer pays in full (gets financing so they can pay).

What may have happened here is that the seller took back financing and a lien on the car (self-financed). A sales contract in such case would include terms and conditions for such seller financing. Another implication here is that the buyer would have to get the parent to sign on the dotted line and be legally responsible for the debt–and mama may well have been “bypassed” by the kid (who is likely too young to enter into contracts on their own).

Until mama had to put her “baby” on her automobile insurance policy and/or got a tax bill as parent of soony boy and/or try to get title on the car… and mama wants nothing re. another vehicle.

2.) If there were some sort of contract, “forgetting” to have a ‘no-recourse’ provision (if state law allows) in the terms. If this is “left out”, then the purchaser (or, in this case, mamacita as legal representative by default) can demand that the seller take back the item. This could happen for almost any reason, and those need not fall under terms normally assigned to “Lemon Laws”. If the buyer were unable to register the vehicle, could not get insurance, or failed to get financing on their own and someone refused to co-sign the loan…you get the picture.

3.) Not checking state law as to how a contract can be established/oral contracts can be proven to exist (and the applicable terms allowable under state law if it does). A written contract is NEVER required to prove that a contract exists. It does not with credit cards..it does not when one sells an item to someone else, even as an owner-buyer direct sale. Keep in mind this was a motor vehicle, and that, to transfer title, there would have to be a way to prove that the transfer was legally accomplished…in the case of a sale, by contract. An oral contract could well be enough to do this, if the seller confirms to the satisfaction of the authorities that the transfer was legal.

If the buyer can establish the unwritten contract in court? Touché!

Posted in Commentary., Credit repair., Credit reporting and CRAs, Creditors, Uncategorized, contracts, public records | Comments Off