Super-Charging Your Credit Counseling Program

Transcription

1 Super-Charging Your Credit Counseling Program April 5, 2017

2 Get to Know Your Producer - Carolina Valderrama Affordable Lending & Housing Outreach Senior. Manages the CreditSmart Program Responsible for training and education of Industry professionals Educates borrowers about alternatives to foreclosure 1 Works with servicers and housing counseling agencies to support affordable and sustainable homeownership Graduate of Nicholls State University with a degree in Mass Communication. Holds a Post graduate degree in Paralegal Studies from The George Washington University and an Accredited Mortgage Professional Designation from the Mortgage Bankers Association. 2

3 Get to Know Your Presenter Cora R. Fulmore Manager/Owner of the Mortgage & Credit Center, LLC Creator of The Counselor s Corner, Inc. an online training center for housing professionals, with more than 4,000 members Co-organizer of the first Florida Housing Counselor Network, statewide More than 35 years of experience in mortgage & credit counseling and training National Consultant for many organizations, current faculty member of NeighborWorks since 1994; provide training in the area of: ü ü ü ü Certification for ED s and Program Managers Housing Counseling Certification Foreclosure Prevention Credit Counseling CreditSmart trainer since 2001 Disclaimer: I ve made every effort to provide updated information for this presentation. However, today presentation is not a substitute for you staying abreast of industry changes and updates. 3

4 The Counselor s Corner Your Online Resource for Housing Counseling and Real Estate Professionals Your one-stop Resource Center Provides information that enhances your knowledge of industry changes and regulatory updates in a timely manner, all in one location Our online Learning Center provides Continued Education Hours for your active participation Registration to TCC is FREE 4

5 National Industry Standards The Counselor s Corner supports the mission of the National Industry Standards in Foreclosure, Homeownership Counseling & Education. The Standards help practitioners and organizations serve families and communities in a consistent and professional manner. This webinar: ü Promotes consistent & quality counseling ü Builds competency & knowledge of the housing professional ü Provides useable resources 5

6 GoToWebinar Platform Toll Number: Access Code: Webinar ID: A survey will pop up at the end of today s webinar - please complete Your pop-up blocker must be disabled to view and complete the survey We appreciate your feedback! 6

7 Certificate of Completion Not offered for this webinar You will receive a copy of today s presentation We encouraged you to participate in our knowledge checkpoint & poll questions 7

8 Webinar Objectives: Analyze key principles of Credit Counseling and identify common credit barriers and how to work through Evaluate major Consumer Protection Laws and why knowing this information is important in credit counseling Discuss ways to evaluate credit profiles Identify helpful resources & tools for you and your clients 8

9 Poll Question 1. What percentage of consumers have errors on their credit report? a. 76% b. 45% c. 21% d. 7% 9

10 Poll Question 1. What percentage of consumers have errors on their credit report? a. 76% b. 45% c. 21% d. 7% From November January 2016 to November January 2017 Georgia (59 percent), South Dakota (43 percent), and Mississippi (34 percent) experienced the greatest complaint volume percentage increase. 10

11 Consumer Financial Protection Bureau 11

12 Consumer Complaints Consumers frequently complain about the processes for disputing information on their reports with consumer reporting companies. Many complaints indicate that consumers experience difficulties when submitting disputes through the phone and mail channels. Consumers sometimes report barriers to submission of disputes (e.g., authentication questions or customer service representatives that encourage consumers to contact the data furnisher first). After submitting disputes, some consumers claimed not to have received the results of their investigations or to have only received them after a lengthy delay. 12

13 Pay a $3 million penalty: Experian must pay a civil money penalty of $3 million to the Bureau s Civil Penalty Fund. Truthfully represent the usefulness of credit scores it sells: Experian must inform consumers about the nature of the scores it sells to consumers. Put in place an effective compliance management system: Experian must develop and implement a plan to make sure its advertising practices relating to credit scores and on Internet webpages that consumers access through AnnualCreditReport.com comply with federal consumer laws and the terms of the CFPB s consent order. The full text of the CFPB s Consent Order against Experian is available here: 13

14 Know the current CLIMATE 14

15 Federal Trade Commission study in 2015 Found that one in four consumers have potential mistakes on their credit reports. One in 20 may have errors significant enough to negatively impact how much he or she pays for a loan, or whether credit is provided at all. 15

16 SOURCE: CFPB March 2017 Report consumerfinance.gov/f/documen ts/201703_cfpb_consumer- Response-Annual-Report PDF 16

17 Fair and Accurate Credit Transactions Act Section 319 requires the FTC to conduct it s first study of the accuracy and completeness of consumer credit reports. 17

18 FTC Study 2015 In a Federal Trade Commission (FTC) follow-up study published in January 2015, consumer credit report errors remain a growing concern for most Americans. Inaccurate information seriously impacts the cost of credit card debt, auto loans, insurance policies and other financial obligations. Poor credit also plagues our society and impairs a consumer s ability to become a homeowner. SOURCE: FTC Report to Congress under Section 319 of the Fair and Accurate Credit Transactions Act of

19 Low Scores Experian Vantage Score 19

20 Poll Question 2. What s the average credit score of the clients you serve? a b c d

21 Credit Counselors are not Attorneys Know when to refer you are not an Attorney Many of your clients may be faced with collection accounts, civil judgments, wage garnishment, defaulted student loan, levy on checking and or saving accounts. Some may be harassed by collection agencies and in fear of the IRS. Others are unsure about the new bankruptcy laws. 21

22 What is Credit Counseling? 22

23 Credit Counselor Demographics National estimates for this occupation: v Industry Totals: 34,110 v Average Salary: $49,480 SOURCE: 23

24 Credit Counselors by Area SOURCE: 24

25 Ask the right QUESTIONS 25

26 Art of Questioning - Exploratorium Asking the right question is at the heart of effective communications and information exchange. Getting the answer to the right question, will give you the information needed to help your client. 26

27 Top 5 Questions to ASK 1. Have you pulled your credit report lately? Is the information reported accurate? Check every section of the report i.e. identification information, tradelines (status, balance & limit), public records, inquires and understand the impact of the credit score reason codes. Beware of the client who claims that everything is wrong or not their fault. I would suggest they pull the FREE report from or buy a report from (cost is $19.95). 27

28 Sample Credit Report ID Section Tradelines Section Reason Code 28

29 Top 5 Questions to ASK 2. Have you been sued? Are there any judgments (present or past)? If so, has the judgment been satisfied? Are your wages being garnished? Are there children in the household under the age of 18? The answers to these questions will start to shape your action plan. Remember a judgment is a legal action a may require a referral to an attorney. 29

30 Consumer Data Industry Association - CDIA The CDIA, the trade organization that represents all three major credit bureaus Equifax, Experian, and TransUnion says they have agreed to remove from consumer credit reports any tax lien and civil judgment data that doesn t include all of a consumer s information. That information can include the consumer s full name, address, Social Security number, or date of birth. The changes are set to take effect July 1. Roughly 12 million U.S. consumers should expect to see their FICO scores rise as a result of the change says Ethan Dornhelm, vice president of scores and analytics at FICO. The vast majority will see a boost of 20 points or so, he added, while some 700,000 consumers will see a 40-point boost or higher. 30

31 What is a JUDGEMENT? A judgment is issued by the court stating that the creditor (or other plaintiff) has won the lawsuit and is entitled to a certain amount of money. Once the creditor has a judgment against a consumer for a certain amount of money, the creditor can employ a host of methods to collect the money that are unavailable without a judgment. The judgment must be filed with the court clerk -- and this usually happens a day or two after the judge issues it. PLEASE REMEMBER, YOU ARE NOT AN ATTORNEY. If a client is being sued, please refer to an attorney. Some attorneys may offer free services or charge a reduced fee. There is also legal aid and legal clinics in most markets. Servicemembers should consult their local JAG office. 31

32 Garnishment vs. Levy A garnishment or wage attachment is an order from a court or a government agency that is sent to the employer. It requires the employer to withhold money from the employee s paycheck and send the money directly to the creditor. A levy is when the creditor enacts a levy against the borrower s account, it means the creditor freezes a financial account and then usually takes the money in the account to cover the debt. The creditor then takes any future money that s deposited into the account until the debt is paid off in full. 32

33 Top 5 Questions to ASK 3. Are there any repossessions in your file? If so, did the lender sell the vehicle? Usually the balance reported on a repossession is the balance at the time of the repo. Once the car is repossessed it s usually sold. Your client should always verify the balance. 33

34 Top 5 Questions to ASK 4. When did you stop making payment? Have you agreed to a payment arrangement? If the client s interaction with the creditor has not been pleasant, this could make your job difficult. Determine if there are any landmines that will derail your efforts. 34

35 Top 5 Questions to ASK 5. Have you filed bankruptcy? When was it filed? What type - chapter 7 or chapter 13? Was the bankruptcy discharged or dismissed? REMEMBER NEVER SUGGEST THAT A CLIENT FILE BK. If it s needed, you might suggest that they seek legal counsel. Make sure that you are aware of what debts were included in the bankruptcy. 35

36 Discharged or Dismissed A discharge means that all the requirements set by the court have been met by the debtor. ü In a Chapter 13 bankruptcy this means that all the debtor s payments have been made in full and on time. ü For a Chapter 7 bankruptcy it means that all the creditors and unsecured debts listed in the bankruptcy petition (filed with the Court) have been wiped out. A dismissal is not the desirable outcome for a debtor. A case can be dismissed for many reasons like not being able to afford the Chapter 13 payments because life circumstances have changed (i.e. job loss, etc.). In either type of bankruptcy, not completing required credit counseling and financial management courses could cause a dismissal as well as if the case was improperly filed. 36

37 Knowledge Checkpoint Question The maximum amount that can be garnished from a pay check is percent? The law sets the maximum amount that may be garnished in any workweek or pay period, regardless of the number of garnishment orders received by the employer. The weekly amount may not exceed the lesser of two figures: 25 percent of the employee's disposable earnings, or the amount by which an employee's disposable earnings are greater than 30 times the federal minimum wage. 37

38 Know the LAWS 38

39 The Consumer Protection Laws You Must Know and Why? 39

40 Fair Credit Reporting Act Consumer Rights: entitled to a free credit report if: adverse action was taken against a consumer; because of information in the credit report profile; they are a victim of identify theft and place a fraud alert on their file; their file contains inaccurate information as a result of fraud; they are receiving public assistance; they are unemployed but expect to apply for employment within 60 days. In addition, the FACT Act in September 2005 all consumers will be entitled to one free disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies. 40

41 Fair Credit Reporting Act Consumers have the right to dispute incomplete or inaccurate information. Consumer reporting agencies may not report outdated negative information. Consumer reporting agencies may not report negative information that is more than seven years old, or bankruptcies that are more than 10 years old. 41

42 Poll Question 3. Which credit reporting vendor has the most comprehensive file in your market? a.equifax b.experian c.transunion 42

43 Equal Credit Opportunity Act This regulation prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. 43

44 Fair Debt Collections Practices Act Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect a debt. Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them. 44

45 FDCPA A debt collector, in collecting a debt, may not harass, oppress, or abuse any person. Specifically, a debt collector may not Use or threaten to use violence or other criminal means to harm the physical person, reputation, or property of any person Use obscene, profane, or other language that abuses the hearer or reader Publish a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3) of the FDCPA Advertise a debt for sale to coerce payment Annoy, abuse, or harass persons by repeatedly calling their telephone number or allowing their telephone to ring continually Make telephone calls without properly identifying himself or herself, except as allowed to obtain location information 44

46 Fair Credit Billing Act This law applies to "open end" credit accounts, like credit cards, and revolving charge accounts, like department store accounts. It doesn t cover installment contracts loans or extensions of credit that s repaid on a fixed schedule. 46

47 Knowledge Checkpoint Question Under the Fair Credit Billing Act (FCBA), the consumer must file a dispute within days? Within 60 days after the first bill with the error was mailed. The creditor must acknowledge your complaint, in writing, within 30 days after receiving it. The creditor must resolve the dispute within two billing cycles (but not more than 90 days). 47

48 Truth In Lending Act The most important aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower. It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans. 48

49 Thoroughly understand the CREDIT REPORT 49

50 Not all formats are the same But all formats provides the same basic information. 50

51 Key things to look for Dispute any variations in the name How should you dispute: The address reported on this account is incorrect. I have never lived at this address. Please remove this information immediately. 51

52 Inaccurate Information Inaccurate address information can bring inaccurate tradelines information I ve never lived at this addressl 52

53 Verify the trade line information 53

54 Understand the impact of activity on the SCORE Inquiries Tradelines Verify its accuracy übalance, date the information was reported, status/rating, history FDCPA Applies to Debt Collectors, Not Creditors The FDCPA applies to debt collectors only, not to creditors collecting their debts. However, some states have laws that restrict what creditors can do when collecting debts. 54

55 Using Trending Data As it stands, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages or student loans. Through trended credit data, lenders can access the monthly payment amounts that a consumer has made on these accounts over time. 55

56 What type of credit user are YOU? Research shows that information is an important predictor of risk. Revolvers are three times more likely to default on new credit cards and auto loans and five times more likely to default on current credit cards Transactor -- those who actively pay down their balances -- are a lower risk than those who just make the minimum payment. 56

57 CFPB reports Invisible & Unscored Credit More than 26 million consumers are effectively "credit invisible" because they have no credit record and another 19 million are "unscored" because they have an insufficient or stale credit history. 57

58 Next subprime bubble to burst: Auto Loans The auto finance market has grown significantly in the past few years. According to Experian Automotive, outstanding auto loan balances reached a record-breaking $870 billion in the third quarter of this 2014, an increase of 9.9% and 24.5% over the same periods in 2013 and 2012, respectively. As of the end of the third quarter of 2014, loans to consumers with below prime credit comprised 38.7% of open accounts, totaling over $336 billion. 58

59 Auto Loan 60 day + Delinquencies 59

60 Student Loan Debt 60

61 The Knowledge Gap 40 million consumers have at least one student loan 7 million borrowers are in default 11.5 percent of student loans were at least three months delinquent Navigating the Student Loan Maze 4-part Series starts May 4 th 61

62 Step One: Identify the type of Student Loan Federal Direct Loans Stafford is the most common federal loan received. Either the federal government or a third-party will offer these loans. There are two types: subsidized or unsubsidized. - Subsidized Will not charge interest until after borrower leaves school. - Unsubsidized Interest is charged from the time the loan is disbursed This loan type has a 6 month grace period after the borrower leaves school or drops below half time enrollment. Perkins are a type of subsidized student loans, with a fixed interest rate of 5% that does not start accruing interest until repayment starts, typically 9 months after graduation. These loans are guaranteed by the U.S. Dept. of Ed, however administered by the schools. PLUS acronym for Parent Loans for Undergraduate Students, also made to students, interest 7.9%; credit is a consideration. Has no grace period and the interest is not subsidized. Consolidation loan allows the borrower to combine several existing loans into one new loan with a fixed interest rate and (generally) a longer term. 62

63 Private Student Loan Types Private student loans generally come in two types: üschool-channel üdirect-to-consumer School-channel loans has the lowest interest rates but generally take longer to process. School-channel loans are "certified" by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school. Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student. While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly in some cases, in a matter of days. 63

64 Step Two: Has the Grace Period Expired The grace period is a set period of time after the borrower graduate, leave school, or drop below half-time enrollment before they must begin repayment on the loan. The grace period gives the borrower time to get financially settled and to select the repayment plan. Not all federal student loans have a grace period. For most loans, interest will accrue during the grace period. 64

65 Step Three: Know the Options Repayment Plan - Income-Based Repayment (IBR) - Income-Sensitive Repayment Plan Deferment Forbearance Loan Consolidation Rehabilitation Standardized Compromise and Write-Off Special Programs for Military Forgiveness or Cancellation of Debt 65

66 Loan Cancellation Closed School Discharge. If the college closed while the borrower was in attendance or up to 90 days after withdrawal Unpaid Refund. If borrower withdrew and the college owed a refund but never returned the funds to the lender False Certification Discharge. If the college improperly certified the borrower s ability to benefit from a higher education or the borrower is a victim of identity theft Death Discharge. If the borrower (or the student for whom a parent borrowed a Parent PLUS loan) dies Total and Permanent Disability Discharge. If a doctor certifies that the borrower is totally and permanently disabled, or if a veteran is unemployable due to a service-connected condition. 66

67 Loan Forgiveness for Public Service Employees In 2007, Congress created the Public Service Loan Forgiveness Program to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance due on their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers. 67

68 Resources FinAid.org Federal Student Aid Student Loan Borrower Assistance Project Federal Student Loan Consolidation loanconsolidation.ed.gov US Dept of Education s Debt Collection Service FSA Ombudsman CFPB CFPBOmbudsman@cfpb.gov Public Service Loan Forgiveness NSLDS 68

69 Student Loan Resources General Servicing Information Electronic Announcement Loan Servicing Information Income-Based Repayment (IBR) Plan IBR Fact Sheet IBR Q&A Public Service Loan Forgiveness Program PSLF Fact Sheet PSLF Q&A Delinquency and Default Management Electronic Announcement Delinquency Prevention Activities 69

70 Garnishments Resources Administrative Wage Garnishment (AWG) Garnishment Calculator If Your Wages Are Garnished: Your Rights Your State Garnishment Laws Head of Household Exemptions NOLO 70

71 Consumer Laws Resources v Fair Credit Reporting Act Summary v Equal Credit Opportunity Act v Fair Debt Collection Practices Act v Fair Credit Billing Act 71

72 Additional Resources CreditSmart for housing professionals CreditSmart for consumers Freddie Mac Housing Professionals Resource Center Subscribe Free credit report Ø Equifax Ø Experian Ø Trans Union

73 Military Resources SCRA Public Law December 19, Armed Forces Legal Assistance Program Office CFPB Servicemember protections / 73

74 What s your Responsibility? To know the programs and the options to assist in your client s coaching and counseling needs. 74

75 The Counselor s Corner Your Online Resource for Housing Counseling and Real Estate Professionals Your one-stop Resource Center Provides information that enhances your knowledge of industry changes and regulatory updates in a timely manner, all in one location Our online Learning Center provides Continued Education Hours for your active participation Please make sure that your entire counseling staff is registered on the site! 75

76 Questions? 76

77 Super-charging Your Credit Counseling Program Please complete the post session survey. Disable your pop-up blocker now! 77

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