Archive for May, 2009
How does everyone feel about what the article below addresses?
Its long but well worth the read, it’s very informative.
Equifax, Experian and Transunion have begun limited marketing of a new consumer credit scoring algorithm to Risk Based Lenders. According to David Rubinger of Equifax, the planned nationwide rollout to Risk Based Lenders is scheduled for July, and will be followed, approximately 9 months later, with the public disclosure of these scores to consumers.
An algorithm is a mathematical formula that is written to assign value to specific data in order to attain a final score. Risk Based Lenders are financial institutions that lend money based upon a consumer’s credit history and the consumer’s ability and historical willingness to repay a loan. These types of lenders cover the full range of financial institutions lending money for credit cards, auto loans, unsecured loans and mortgage loans.
David Rubinger, the national marketing contact for Equifax, explained “approximately one year ago, the analytical managers for the 3 credit bureaus got together for the purposes of addressing variations within the present scoring models in use. Under the current system, the three major credit-reporting agencies use three different algorithms that produce three different and unique scores, regardless of the data being scored. The primary issue to be addressed was how they could create a solution for Risk Based Lenders who wanted fewer variations within the credit scoring models they were using to make lending decisions.”
The solution for the three agencies was to create a single algorithm that would produce a more “predictive score” by creating a single variable in scoring, which would be the data. To do this, they came up with a solution that involved creating an independent company called VantageScore, LLC. Each credit-reporting agency would own an equal share in the company, and purchase a license to use and sell the resulting scores to risk based lenders under the VantageScore service mark. The hard part was creating the uniform scoring that the three credit-reporting agencies were attempting to design and sell.
To achieve as close a model as possible, the three credit agencies tested the initial base algorithm on 15 million active credit files. Throughout the testing process, changes were made to the algorithm as were needed to create a more stable scoring model until the finished product created an acceptable level of score variance in the finished product.
By creating an independent LLC company, the three credit reporting agencies are now able to offer a single product that has only one variable, the data being scored. Where the credit information reported is the same, the score for a consumer file will be the same, regardless of whether the score comes from Transunion, Experian, or Equifax. Where the credit information is different, the variations in the actual score will be significantly reduced.
Under the new VantageScore product, the three agencies decided to change the scoring formula from its current 450 to 850 scoring range to a new 501 to 990 range. When asked about why they would do this, Rubinger responded, “The new scoring model is to help consumers better understand their credit score. By basing it on a grading scale used throughout the K through 12 school system, consumers can look at their score and know exactly what they have”. Unfortunately for Risk Based Lenders, the new scoring model will require they spend thousands of dollars in updating software to incorporate the new scoring model.
When asked about some of the negative aspects of the change, Mr. Rubinger declined to answer any questions.
The initial question that Down Payment Solutions has relates to anti-trust laws and where the congressional oversight is. As we only have three major Credit Reporting Agencies, how is it they can bypass any oversight to create an LLC company in order to offer a single uniform product in which all can sell, with the goal appearing to be the complete replacement of the present day independent scoring algorithms?
When contacted for comment on this matter, the Department of Justice – Anti-Trust division – declined comment and suggested consumers who have concerns should e-mail them at antitrust.complaints@usdoj.gov. Neither Senator Bill Nelson (D – FL), Senator Mel Martinez (R – FL), Congressman Jim Davis (D-FL) or Congressman Michael Bilirakis (R- FL) offices would offer any comments for this article.
Jan Helder of the Helder Law Firm called the formation of a LLC by the three Credit Reporting Agencies “shady, at best” and advised that, unfortunately for consumers, they “cannot file an anti-trust suit until they have experienced a financial loss resulting from the new VantageScore credit scoring system, and then they will have to prove financial loss in court.” This will be well after low to moderate-income families, and the businesses dependent upon them, have felt the tightening of credit nationwide.
“The new VantageScore model creates a significant financial risk to consumers in their ability to obtain affordable financing,” according to Dwayne Singletary of Allstate Mortgage and Loan Corp in Tampa, Florida. “Many risk-based lenders in the mortgage industry use all three credit-reporting scores–also known as a Tri-Merged Credit Report–and have programs that allow them to use the credit-reporting agency that has the highest credit score. A reduction in that higher score will most likely result in home buyers needing more money out of pocket for a down payment, or require them to pay a higher rate of interest…” under the VantageScore model, whether refinancing or purchasing.
In the installment and revolving credit market, most risk-based lenders do not use the scores from all three reporting agencies. Rather, each lender selects the reporting agency that best fits their type of borrower. A reduction in any one score across any credit-reporting agency, via adoption of the VantageScore algorithm, could result in consumers being unable to obtain credit, or consumers paying a significantly higher rate of interest to borrow the same money tomorrow, versus what they would pay under the current separate credit-scoring models.
Rubinger contends the new scoring model is designed to help consumers better understand their score. However, given the thousands of dollars in financial costs that will be incurred by Risk Based Lenders in updating programming, it leaves the impression the new scoring model may actually be designed to mislead consumers into believing the new VantageScore system actually improves their credit scores.
Under the current system, in theory, if a consumer has a Transunion credit score of 600, then potentially under the new VantageScore model, they could have a score as high as 720. This certainly would go a long way towards silencing a potential consumer backlash if someone with challenged credit sees a dramatic increase in their credit score. This is potentially misleading, and may be the reason for the delay in consumers having access to their new VantageScore credit score for any given credit-reporting agency.
At present, it has not been disclosed how consumers will know what model they are being scored under. As consumers apply for credit, most will assume they are being scored under existing Credit Models, when in fact; they may have been scored under the VantageScore system if a particular financial institution adopted it.
Consumers who are concerned about the potential implications that VantageScore has on their financial future should contact the DOJ – Anti-Trust Division. In addition, we strongly encourage you to contact your Congressman via www.congress.org.
Down Payment Solutions believes that before this new Credit Scoring System is implemented, both the DOJ and Congress have some over sight as to how, when and if Transunion, Experian and Equifax, can implement this type of product in order to protect every American consumer and the businesses dependent upon them.
You are free and encouraged to reproduce, link to, e-mail and redistribute this article in its entirety as long as you leave the below author information intact.
Author: George Chaney, President, Down Payment Solutions, Inc. http://www.downpaymentsolutions.com
Corey
Watchdog agency for credit card co. abuse?
Posted by admin in United States on May 17, 2009
I have been ripped off by a credit card system & need to know which Agency is a watch dog for credit card abuse of consumers. I paid off a defaulted credit card debt of $50,876 in 2007. The credit card co. accepted $26,000 as a settlement for full & final payment. At the end of the year they sent me a 1099 showing a debt discharge of $60,268 to add to my income tax filing. When I inquired they told me once you default on a credit card they raise the interest to 29% + a monthly fee of $78. This gives them a much higher debt loss reimbursement from their insurance co. The bank WINS BIG TIME, IRS WINS BIG TIME & the DEBTER get the screw job owing more than the original debt. Who can help me find a consumer agency that will help me do battle with the BANK OF AMERICA. Need some help to a small consumer under water from debt.
JK
Cheryl
Consumer Credit Counseling Services are Here to Help
Posted by admin in Debt Consolidation on May 16, 2009
Many people who are suffering the financial strain of having too much debt turn to consumer credit counseling services to get their finances back on track. They have the experience and resources to teach you how to successfully put together a monthly budget that will help you better manage your money.
This is the financial downfall of many people, not managing their money properly. Once you are able to create a personal budget showing your income and expenses it becomes easier to control where your money is going. Too many people have lost control of their money and spend most of the time between pay checks wondering where it all went.
This is where credit counseling services can be of help. They have helped hundreds if not thousands of people in the same circumstances come to grips with their financial problems. They understand the straights you are in and will work to help you come to terms with building a workable and sustainable budget. In addition to reviewing all your financial data and making recommendations as to how best approach your current debt situation they should also begin to work with you on your long term financial goals.
A good consumer credit counseling service will also teach you how to and help you make arrangements with your creditors that will allow you to meet your budget every month. This will help to stop the threatening phone calls and letters and give you an opportunity to make good on your debt that works for you. Many debt collection agencies are quite happy to leave you alone as long as you do send them something every month. This can also help you avoid legal action that some creditors can take when trying to recoup what you owe.
All these services will charge some sort of fee if you decide to seek their help. Be sure to check around and compare the cost of doing business and avoid those companies that charge higher prices. In fact there is a good chance that there is a non-profit credit counseling service in your area. They normally cost less then for-profit companies and the advice you get will generally be some of the best. If you are not sure if the company you are dealing with is a non-profit contact your local IRS office where they keep records on all business and there status as non-profit or for-profit.
A consumer credit counseling service will give you the best results for your money if you are honest with yourself and them about your financial problems. You will need to reveal all your income, expenditures, and debts you owe and those you are having trouble paying or are behind on. They will give you the best advice and help you meet your financial goals if they can see the whole picture.
Leslie
Major League Baseball® Credit Card: Avid Fans Carry the Card
Bank of America and Major League Baseball are creating excitement in the credit card industry. Like many colleges, airlines, and department stores have done in the past, Major League Baseball team logos are now being displayed on consumer credit cards. These team logo credit cards are rapidly growing in popularity and proving to be a hit with baseball fans throughout the country.
The Major League Baseball® Extra Bases™ Credit Card from Bank of America offers no annual fee and a 0% introductory Annual Percentage Rate (APR) on balance transfers and cash advance checks for the first 12 billing cycles. As incentives designed to gain customer share in the extraordinarily competitive credit card market, the baseball credit card also offers an official MLB™ licensed jersey after the first qualifying transaction using the card. In addition to the no annual fee and 0% introductory APR, the card offers a point based incentive system whereby card holders earn 1 point for every net retail dollar spent redeemable for MLB™ autographed memorabilia, coveted MLB™ life experiences, travel and cash rewards.
Every major league baseball team can be represented on a credit card. Visit www.majorleaguecreditcard.com or www.collegecreditbuilder.com to access the Major League Baseball™ Extra Bases™ Credit online application. Chicago Cubs fans and Los Angeles Dodgers fans and New York Yankees fans now have something in common aside from their love of baseball. Real fans carry the card. With this credit card, consumers can be reminded of their favorite team every time they look into their wallets.
Dorothy
The operation of the connected lender liability provision and deemed agency provision in Sections 56 & 75 of the Consumer Credit Act 1974
The operation of the connected lender liability provision and deemed agency provision in Sections 56 & 75 of the Consumer Credit Act 1974.
To buy something and take time to pay for it later is called a credit. People always make use of credit. The person from whom we take or buy on credit could charge an interest for that. The Consumer Credit Act(CCA) 1974 was enacted so as to provide better protection to those who avail credit from the persons who are engaged in the business of providing credit facility to the consumer. The CCA 1974 was enacted as per the recommendations of Lord Crowther committee on consumer credit, which started its working in 1968. The CCA 1974 came into force with such a big bang as one of the most modern and sophisticated enactment on credit or money lending system, however it took more than a decade to implement all its provision into force. A creditor is responsible for the acts or negotiation of the dealer or supplier who acts on his behalf in a regulated agreement. The creditor is equally responsible to the supplier or the dealer for any misrepresentation or breach of contract if there is a regulated credit agreement and the credit is granted under an agreement between the creditor and the supplier, in case of commercial transaction in which the amount ranges from £100 to £ 30000.
Credit includes a cash loan and any other form of financial accommodations as defined under section 9 (1) of CCA 1974. In a credit transaction a creditor grants a right to debtor to defer payment of debt. Every form of agreement involving credit and loans had been brought into the parlance of the CCA 1974.
An agreement between the debtor and the creditor, based upon which the creditor provides the debtor with credit of any amount is termed as a ‘consumer credit agreement’ as per section 8 (1) of CCA 1974. A consumer credit agreement, or consumer hire agreement, other than an exempt agreement, and “regulated” and “unregulated” agreements will come within the meaning of “regulated agreement.
A “debtor-creditor-supplier agreement” is a regulated consumer credit agreement a restricted-use credit agreement, or a restricted-use credit agreement which falls made by the creditor under pre-existing arrangements, or in contemplation of future arrangements, between himself and the supplier, or an unrestricted-use credit agreement which is made by the creditor under pre-existing arrangements between himself and the supplier other than the debtor in the knowledge that the credit is to be used to finance a transaction between the debtor and the supplier, as envisaged under Section 12 of CCA 1974. The funding agreement was not a credit agreement for the purposes of the Consumer Credit Act 1974 , nor was the relationship arising out of the agreement unfair and the creditors were not consumers for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 as held by Justice Andrew Smith of QB in Maple Leaf M VM Fund v. Rouvroy reported in [2009] EWHC 257 (Comm).
There are four types of credits, running-account credit, fixed sum credit, restricted use credit and unrestricted use credit. A restricted-use credit agreement is a regulated consumer credit agreement, to finance a transaction between the debtor and the creditor, whether forming part of that agreement or not, or to finance a transaction between the debtor and the supplier other than the creditor, or to refinance any existing indebtedness of the debtor’s, whether to the creditor or another person. An unrestricted-use credit agreement is a regulated consumer credit agreement in which the credit is in fact provided in such a way as to leave the debtor free to use it as he chooses, even though, certain uses would contravene that or any other agreement. A running-account credit is a facility under a consumer credit agreement whereby the debtor is enabled to receive from time to time from the creditor or a third party cash, goods and services to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit is not at any time exceeded. A
Fixed-sum credit is any other facility under a consumer credit agreement whereby the debtor is enabled to receive credit in a single transaction or in instalments.
The creditor undertakes while giving a credit token which includes a card, voucher, stamp, form, booklet or other documents, that he will supply cash , goods and services on credit and the third parties who supply goods or render services to the debtor shall be paid by the creditor.
A creditor should be a person who holds a licence as per section 21 of CCA 1974. By virtue of a licence the creditor is authorised to carryon business in giving credit to consumer and he shall be a person fit to carryon such business. He is liable to keep books or other records in the course of business along with the record that contains the details of persons with whom he does the business and those people who seeks to do business with him. A licence held by the creditor shall be terminated either by operation of law or if the Office of Fair Trading suspend the licence. The debtor is not liable to repay the credit if the person who gives a credit is disguised that he holds a licence or the existing licence had been terminated. The creditor shall canvass or advertise regarding an offer of credit only in accordance with the regulations promulgated by the Office of Fair Trading from time to time, and the same should be with in the trade premises of the creditor. A credit token shall only be given who request for that. A duty is cast upon the creditor to display regarding the information about the business consumer credit in the premises in which he carryon the business of consumer credit as per section 53 of CCA 1974.
While entering in to a credit or hire agreements the creditor should disclose the specified information in the prescribed manner as regulated by the consumer credit laws with regard to the regulated agreement prior to the execution to the same as per section 55 of CCA 1974.
A negotiator is deemed to be an agent of the creditor and is acting in such a capacity as an agent of the creditor with respect to the communication and transactions in an antecedent negotiation. A creditor or any person who negotiate for and on behalf of him with the debtor or hirer prior to the execution of the regulated agreement is termed as a negotiator and such negotiation is termed as an antecedent negotiation as per section 56 (1) of CCA 1974. A negotiator other than the creditor or owner in relation to the making of the agreement is deemed to be conducted such negotiation as an agent of the creditor and negotiated for and on behalf of the creditor as per section 56 (2) of CCA 1974. If in a regulated agreement or in a prospective regulated agreement the negotiator who acts for and behalf of creditor is named as an agent of the debtor or hirer the agreement will become void as per section 56 (3) of CCA 1974. The antecedent negotiation start right from the first communication includes a communication by advertisement or any representation made by the negotiator to the hirer as per section 56 (4) of CCA 1974.
In Forthright Finance Ltd v Ingate, the Court of Appeal (Civil Division),
[1997] 4 All E.R. 99, held while allowing the appeal, “ …..that the mere fact that the agreed value for the first car cancelled out the amount still outstanding upon it did not mean that there had been two transactions. Where goods which would be the subject of a debtor, creditor, supplier agreement, were sold or proposed to be sold by a broker, then any negotiations relating to those goods would be deemed to have been made by the negotiator on behalf of the creditor”.
A creditor had a connected lender liability for the conduct of the supplier in case the supplier had violated the terms of the contract or mislead the debtor in any respect with regard to the debtor- creditor supplier agreement. A jointly and severally liability is cast upon the creditor, to the debtor for any misrepresentation or breach of contract done by the supplier in connection with a debtor- creditor- supplier agreement, with respect to a commercial transaction, even if the debtor had contravened any terms of the contract, says section 75 of CCA 1974.
In Jarrett and another v Barclays Bank plc [1999] QB, CA, 1 and another, the appellants / plaintiffs in said cases alleged misrepresentation and breach of contract against the bank, creditor and violation of debtor-creditor supplier agreements. The appellants / plaintiffs filed a suit against the creditors in pursuant to section 56 (2) and 75 of CCA 1974. The court held that the a cause of action will arose in UK, in the applicability of debtor- creditor supplier agreement, even if the subject matter is situated outside the territorial jurisdiction of UK courts.
Lord Justice Morritt in Jarrett and another v Barclays Bank plc held that “I can see no reason at all for supposing that parliament intended to enact in relation to the statutory cause of action conferred by section 75 (or section 56) any jurisdictional requirement to be observed in proceeding against the supplier. But I do not think that the answer to the question lies in the principles established by the European court of justice in the interpretation of the words “proceedings which have as their object”.
Under section 75 (1) of CCA 1974 the debtor who had a claim for misrepresentation or breach of contract against the supplier had a remedy against the card issuer (creditor) as well, if the agreement was a debtor-creditor supplier agreement. The Office of Fair Trading brought proceedings seeking declarations in relation to certain issues concerning connected lender liability arising under section 75 (1) of CCA 1974, against a creditor, in Office of Faire Trading v Lloyds TSB Bank plc and others [2006] All ER (2) , 821.
To conclude with, Section 75 CCA 1974 guarantees that a purchaser of goods and services or a debtor could have another choice or additional course of action against the creditor if their purchase was substandard and the supplier/retailer was either unaccommodating or not available due to insolvency. The creditor had to bring its commercial power to bear on the recalcitrant supplier to fulfil the debtor’s right in circumstances where the supplier was still in a position to provide a remedy. Section.75 of CCA 1974 provide useful security to debtors who would otherwise have suffered when namesake companies and paper companies went out of business, having failed to fulfil their commitments but having already grabbed the debtors money.
The negotiator who had initiated the negotiation with the debtor became the deemed agent of the creditor under Section 56(1) (c) of the 1974 Act. Section 56(1)(c) refers to negotiations conducted by the dealer/ supplier, and relates to a transaction financed by creditor /third party finance. The dealer who sold the goods to the creditor under Section 56(1)(b) could be termed as a credit-broker. However negotiations which are “antecedent” to the conclusion of the relevant agreement which apply to statutory agencies under section 56(1) (b) and (c). Section 69(6) provides that the dealer is the deemed agent and section 102 deals with notice of rescission where again the dealer is the deemed agent. Section 56(1) establishes a statutory agency for negotiations that are antecedent to the conclusion of the relevant agreement.
Thus section 56 and 75 of CCA shields the debtor / consumer from being mislead and infringe their legal right by causing unlawful loss to them.
Alma
Consumer Credit Counseling – 7 Tips You Should Know Before You Sign Up!
If you’re thinking about getting some outside help by way of credit counselors and don’t know anything about them, the following tips may help you understand what consumer credit counseling services are all about and what to beware. Basically, counselors can help you get control of your money flow – incoming and outgoing.
1. Credit counseling services can be for-profit or nonprofit. Both types charges fees, however there are some nonprofits that offer free counseling, see tip #3.
2. Credit counselors may or may not be certified. If possible use a certified counselor. You may be more limited in your choice of the type of counselor if you choose a nonprofit but they may have enough necessary experience to help you with your debt management or any debt consolidation.
3. Although nonprofit consumer credit counseling services are nonprofit they are not always free. And some may not be affordable. Some may want you to make donations that will add to your overall debt problems.
4. For-profit credit counseling services may charge high or excessive fees. Some of these fees may not be obvious so read any contracts carefully.
5. Credit counselors can help with a wide range of budget and credit problems. The can help you plan a budget, help educate you and provide helpful credit resources. They can help with car or home loan or mortgage applications. They can help with credit card consolidation or consolidation of other bad debts or debt consolidation.
6. Nonprofit consumer credit counseling services are found at colleges and universities, at your local credit unions, on military bases or installations or through your local community resources hotline.
7. If you’re unable to find a nonprofit counseling service then talk to your local bank or lending institution and ask for a recommendation. Or get some names from your local Chamber of Commerce. In any case, check with your local or state Better Business Bureau to see if they have any unresolved complaints against the service on file. If you have a local consumer protection agency, check with them also.
If at all possible try to repair your credit yourself if your credit needs fixing. There are easy, inexpensive ways to do it. If the situation has run amok than seek out nonprofit counseling services first. If you have to hire a for-profit agency, make sure you read the fine print on any contracts and have someone else look over the contract too if possible. Making an effort to resolve your credit problems, whether through a consumer credit counseling service or not, will pay off in the end and protect your future credit report and score.
Joan
credit report, that i do not understand?
2 weeks ago i applied for a credit card, i have received a report stating that i did not qualify.now,i have not had any credit in over 10 years mostly by being out of the US(overseas) i understand the part of not having any credit in 10 years..
yet i do have a bad mark from TU consumer…and it says # the credit-reporting did not make this credit decision and is unable to provide you with a specific reason for our action.#
how can this be? i have never received anything from anyone as owing money, and i am more than sure i do not owe money.
thank you for reading me .
Christine
Does anyone else get weird-ed out when a checkout clerk looks at your credit card and calls you by your name?
Posted by admin in Other - Society & Culture on May 10, 2009
I’m just not into the whole making friends, “establishing a healthy consumer relationship”, or being stalked thing.
Donald
In college, what does being a single targeted demographic do to one’s consumer roles?
Posted by admin in Psychology on May 10, 2009
How are we affected by the masses of businesses all targeting us simultaneously as college students? Credit? Buying Habits? Personal Experience? I’m trying to compile a thesis so anything you think might help would be awesome!
Jean
Do you know of any businesses that have broken consumer laws?
Posted by admin in Law & Ethics on May 10, 2009
1.The Sale Of Goods Act 1979 – Goods must be good quality and customers are entitles to a refund/replacement if they are not.
2.The Trades Description Act 1968 – The product must fulfill their description. (do what it says on the tin)
3.The Weights and Measures Act 1951 – Weight on the packet must be accurate.
4.The Food Safety Act 1955 – Food must be safe and accurately labeled. Allergies and vegetarian info must be clear and Sell-by-Date must be visible.
5.The Consumer Credit Act 1974 – When lending money, businesses much have interest rates clearly stated and give consumers adequate time to decide whether they want to accept the agreement.
Do you know of any well known companies that have broken any of these laws?
Thanks.
Ted