The first Emotional Budget Buster is Denial, and, as financial counselors, we hear it every day. “I don’t need a Spending Plan. I manage my finances just fine.” On the wall in my office is a drawing of a large circle, with a tiny dot in the upper right-hand section.  The circle represents Information. The dot, “More than you can ever dream of knowing.” Trust me; there is a lot to know about your finances, and if you think you’re doing ‘okay’, you probably sense that you could still do better. What are the current interest rates on all my loans? When is the right time to open a new credit account? When should I refinance my home? How much do I need to save for every year I’ll live in retirement? Most people can’t answer these questions, and those are the easy ones!

Our second Emotional Budget Buster is Apathy.  I remember trying to do a simple spending plan with a former roommate – a pretty lazy guy, and his response was predictable, “Ugh, I don’t want to make a budget right now.”  People put off a lot of things, but money management shouldn’t be one of them. An effective Spending Plan can make a huge difference in your life.  It helps identify waste and highlights expenses that can be adjusted.  Those adjustments build savings, and pretty soon, you’re on your way to reaching your short- and long-term goals.  Imagine a day when you no longer dread opening your bills. That day can be today, as long as you’re willing to take the time to plan.

One of the toughest budget busters to overcome is Defeatism.  I definitely struggled with this when I was younger.  Like many people, I thought “I don’t earn enough money to bother with all that.”  Well, I was wrong.  At the time I brought home about $150 a week, and my bills were around $210.  After a couple of weeks tracking my spending, I was able to adjust my budget in line with my income.  Even better, I took the little I had left over and used it to start building savings.  Even with the job I had at the time, I was able to meet all my obligations and set aside 8% for savings every week.  It doesn’t sound like a lot, and it wasn’t – I started saving just $12 a week, but $12 is better than zero dollars, and when I eventually ran into a little bit of financial trouble, the few hundred dollars in my savings account was a lifesaver.

Finally, we come to our last Emotional Budget Buster, Negativity.  Whenever I meet someone who’s struggling, I encourage them to budget. As you can imagine, the responses aren’t always pretty. A lot of people tell me that the whole thing sounds horrible, or that their friends tried it and hated it.  To be truthful, there is some work involved, but it’s not difficult and the payoff is amazing.  When you completely understand your finances, you gain the ability to make informed decisions, a profound accomplishment all by itself. Instead of being led by your wallet, you lead! Now, that’s positivity in motion, which brings us to our rather obvious conclusion: when it comes to making a Spending Plan, the most important factor isn’t how much money you earn or how much you owe; it’s your state of mind that matters most. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

Well, the holidays have come and gone, and many of us are beginning to receive our credit card statements.  If you’re like most Americans, your holiday debt might make things a little difficult in 2012.  Fortunately, it looks like the 2011 holiday season was successful for most retailers. This is great news for the economy, but what does it mean for your wallet?  In November, we witnessed the biggest growth in credit card debt in more than a decade, with consumers charging $5 billion dollars.  We’re still far away from the peak of American indebtedness, which totaled $972 billion in September 2008, but we’re also in a different financial climate – a climate where more debt can cause a fair amount of problems.

So, what do you do if you got in a little over your head during the holidays? Let’s take a look at some of the methods you can use to resolve your credit card debt in 2012.  First, gather your credit card statements and make a list of the debts you’ve accumulated throughout the season.  Getting a better idea of what you owe will help you to set reasonable goals for repayment. For instance, you’ll have to determine how much money you have left over in your monthly Spending Plan to help tackle these new credit card payments. You can only do that after you’ve determined just how much debt you’re dealing with. This is also a good opportunity to review your budget and update your spending plan.  Remember that you need to make much more than the minimum payment to make a dent in your balances. If you can’t see yourself paying more than the minimum, start trimming some other expenses. A few temporary cutbacks now will help you save enough to pay down your debt faster.

In order to maximize your repayment, there are a number of strategies you can use.   If your credit is in good standing, and you don’t have a lot of credit cards, you may consider taking advantage of a 0% interest balance transfer offer so you can reduce the total amount of interest you’ll pay on your debt. If you know you won’t be able to pay off the full amount of holiday debt you accumulated within the next two or three months, spread it out over six or twelve months at a no-interest rate and pay down that debt as quickly as possible. Again, you may have to make some accommodations in your Spending Plan to manage these payments. It’s important to keep in mind, however, that if you accept a 0% offer, you’re opening a new line of credit, which will cause your credit score to drop, at least somewhat. You’ll also have to factor in the cost of transferring the balance to the new card, generally around 3% of the amount you’re bringing over. Also, be sure you’re aware of what the interest rate will be after the promotional period is over so you don’t end up repaying any remainder at a high interest rate.  You can also use your holiday bonus or tax refund to attack your holiday debt, if you’re filing early. Paying off that debt quickly will relieve some financial anxiety and make it easier to budget other sources of income you have throughout the year.

Now, these remedies, the benefits of budgeting, knowing who you owe, and making a plan to get out of debt – are proven strategies.  However, a do-it-yourself approach won’t work for everyone. Some folks require more specific, personalized attention. People struggle with their finances for a wide variety of reasons, and there are often a number of important factors contributing to their situation. The best way to create a successful plan to alleviate credit card debt is through customized advice. Many Americans are still dealing with stagnant incomes, under-employment, the threat of foreclosure, and an unsure economic future. These issues can complicate a family’s finances, but non-profit credit counseling agencies, including Cambridge Credit Counseling, offer professional advice for free. Counselors take the time to get to know an individual’s circumstances and goals, working with the consumer to create a plan appropriate to the situation.  The non-profit counselor’s mission is to empower people to take control of their finances as they pay down their debts, safely and responsibly.  Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

A cost-benefit analysis is a process you can use to determine the value of a particular financial action you might want to take.  In this case, the pre-frontal cortex instinctively weighs your desire for a product versus the pain of the price. For instance, you may salivate every time you see an ad for the latest and greatest phone, but the $500 price tag is a little tough to swallow. Without much conscious deliberation, your “Accountant” may spring to a logical solution – use your credit card.  But there are other things to consider.  Can you afford to pay back the charge in a reasonable time frame?  What if your new iThing-a-ma-jig provides no additional value beyond instant gratification?  You may not find the answers until after your buy, which may be too late.  What we need is a way to accurately assess the purchase – its pros and cons. Fortunately, there are a few simple strategies that will help us out.

First, use cash. It’s a lot easier to swipe a piece of plastic for $500 than to put 25 twenty-dollar bills in the cashier’s hand.  When we use cash, we force our prefrontal lobe to pay more attention to the pain of the purchase, rather than caving in to the desire.   For instance, as an avid gamer, I was eager to get my hands on the latest gaming system, but I’m not a big credit card user.  When the latest console first came out, it was $500, but I wasn’t eager to part with $500 in cash.  Instead, I waited.  This allowed me to purchase the system later on for $199, which included two free games.  That $300 I saved allowed me to stay within my financial plan, and address more important responsibilities.

Second, get a Budget Buddy.  Even though my career is educating people about the proper use of money, I’m still human.  I sometimes have the same overwhelming desire to buy certain things like everyone else.  Whenever I feel the urge to purchase something beyond my budget, I send a text to my Budget Buddy.   Because my Buddy knows me pretty well, they play “devil’s advocate,” offering objective feedback about the pros and cons of the purchase, and I do the same for her. Whenever she’s battling over whether or not to buy something, she gives me a call.  This partnership has helped both of us avoid some questionable purchases.

The last bit of strategy takes a bit more willpower, but it’s easy: Sleep on it. When you’re considering a major purchase, take a day or so to think about whether you really need the item. Taking time allows you to research the item thoroughly, do some price comparisons, and determine whether the product is in line with your expectations. This way, you stand a better chance of making a decision that’s right for you. I took this approach with my last television.  As I was walking through the store, I noticed what appeared to be a really good deal on an HD set.  My TV was working fine, but it was from the 90’s.  I took a day to think about it, reviewed my budget and the pros and cons of the new TV, and discovered I did want to upgrade.  I reviewed the set online and found the same one at a competing retailer for $100 less. A much better decision by waiting 24 hours.

Sometimes, our mind play tricks on us, but it’s not intentional, there’s simply a lot going on in our head. It’s okay to take a step back every now and then, especially when money is involved.  Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

“The advice I’ve heard is somewhat generic in nature, and that can be a problem,” notes Christopher Viale, a personal finance expert and president of Cambridge Credit Counseling, “People struggle with their finances for a wide variety of reasons, and there are often a number of important factors contributing to their situation. The best way to create a successful plan to alleviate credit card debt is through customized advice.”

Many Americans are still dealing with stagnant incomes, under-employment, the threat of foreclosure, and an unsure economic future. These issues can complicate a family’s finances, but non-profit credit counseling agencies, including Cambridge Credit Counseling, offer professional advice for free. Counselors take the time to get to know an individual’s circumstances and goals, working with the consumer to create a plan appropriate to the situation. The non-profit counselor’s mission is to empower people to take control of their finances as they pay down their debts, safely and responsibly.

According to Viale, who also serves as vice president of the Association of Independent Consumer Credit Counseling Agencies, “There is an army of accredited, knowledgeable, and eager counselors ready to help the public, for free.  AtCambridge, our average counselor has been with us for more than 10 years, and each of them has helped thousands of consumers create personalized plans to get out of debt.

Viale also issued a warning. “If the reports of increased holiday spending levels are accurate, 2012 may be a challenge for some people.  For the last few years, many consumers have done without, but now that creditors are lending again, there’s a risk that we’ll see a return of the ‘kid in a candy store’ mentality. That could do more harm than good for our economy. People still need to be careful as they save for the future, balancing their needs against what they can actually afford.”

To schedule a free, personalized debt evaluation, contact Cambridge Credit Counseling at 1-800-CAMBRIDGE (1-800-226-2743), or visit www.aiccca.org to find an agency near you.

What makes CoreLogic different? The information they collect isn’t typically captured by the three big credit bureaus, which is why many lenders are so interested. The CoreLogic organization has established relationships with a variety of stakeholders in the public and private sectors. Just about everyone from small, local lenders, to county courthouses provide records to the company. Until recently, the information CoreLogic gathered was primarily used for market research, but now it will be used to help assess our financial habits. For instance, if you rent an apartment or own a condo, any late rent payments or Homeowners’ Association dues are likely on file, in addition to the child support judgments, evictions and property liens reported by the courts. Payday lenders and small community banks also supply information on how you manage financial obligations. If you owe more on your home than what it’s worth, CoreLogic knows that, too. Not surprisingly, the inclusion of this kind of information in your credit profile has some consumer advocates concerned.

Chi Chi Wu, a staff lawyer at theNationalConsumerLawCenter, voiced her concerns in a New York Times article. She noted that “there is evidence that all (the new report) could do for a substantial portion of low- and moderate-income consumers is make their credit files worse.” Wu cited utility bills as an example. During the winter months, when heating bills climb, many customers fall behind. They get caught up later in the spring, but this inconsistent pay pattern has the potential to negatively impact a consumer’s CoreScore report. Ms. Wu also suggested some valid reasons why people may withhold their rent payment, for instance, if their landlord failed to address heating or hot water problems. Again, such legitimate activity would adversely affect the consumer.  Wu also questions perhaps the largest threat to a consumer’s CoreScore profile – payday loans. According to Ms. Wu, “Payday loans and other high-cost credit are very onerous, and people have trouble paying them because they have a 400 percent A.P.R.”  Many payday borrowers find themselves trapped in an unfortunate cycle, taking out one payday loan to repay another, thereby prolonging their indebtedness.  Factoring payday loan payment histories into a credit score would penalize many consumers.

The CoreScore report is already available to lenders, and the corresponding credit score is currently in development with FICO, the developer of the most widely used credit scoring formula. The three major credit bureaus, Trans Union, Experian, and Equifax, apply FICO’s scoring model to the information in our reports to generate a credit risk score, a three-digit number ranging between 350 and 800, which describes how well we tend to manage our financial responsibilities. Based on this number, lenders can decide whether or not to lend us money, and if so, at what interest rate. If you have a high credit score, you’re a low risk. If you had a low credit score, you’re a high risk.

The CoreScore credit score is being created specifically for mortgage and home equity lenders; however, there’s a good chance that a more sophisticated tool will eventually be developed, one that will predict how we might behave under different loan terms.  Because CoreLogic will be the country’s fourth major credit reporting bureau, it will be subject to the Fair Credit Reporting Act. Within a year, the new report will be available at AnnualCreditReport.com, and consumers will be entitled to one free copy every year.

What does this mean for you? Give the additional information considered by CoreLogic and the money you could lose through higher interest rates, it’s more crucial than ever that you do your best to make every payment on time and in full. The best way to make sure that happens is by preparing – and following – an accurate monthly budget. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

Why should you change your relationship with money?  – Because things change. More important, you change. One of man’s greatest skills is his ability to adapt, but we rarely do so effectively in the face of a financial challenge. It may be human nature to repeat the patterns we’ve grown accustomed to, but things change too quickly in the financial world – we have to evolve with it.  If we don’t, we’ll end up wasting our hard-earned money, worried about things we can’t control.

Changing your relationship with money is a lot easier than you might think. Fortunately, there’s a tool from the business world that can help you redefine your financial relationship.  A SWOT analysis, S-W-O-T, is an exercise that promotes the critical thinking skills necessary to alleviate financial strain.  SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats, and this type of analysis is conducted whenever a business encounters a situation that could impact their bottom line. For instance, if new legislation will impact the products or services offered by a company, it will conduct a SWOT analysis to gauge how they can offset any meaningful revenue losses.  Key stakeholders will evaluate what they do better than anyone else – in our example, what they lack in relation to their competitors, what opportunities may be presented because of the change, and the threats presented by the legislation.  This line item assessment helps to create a broader strategy, and build confidence to help meet whatever is on the horizon.

Conducting your own SWOT analysis is usually a piece of cake.  You only need a pencil and paper, an open mind, and a fair sense of reality. Similar to a business, you’ll need the stakeholders in your household to be involved, so gather the family and have a frank discussion about your financial situation.  When you’ve come to a consensus on the issues, start to assign them to the appropriate category.  For instance, you may agree that you do a fantastic job of saving and bargain hunting – great strengths to have. Conversely, your family may have issues managing high levels of credit card debt, which is a common weakness found in our current economy. Another very important part of the analysis is looking inside and outside the household for threats.   Threats come in many shapes and sizes, and may be unique to your family.  For instance, one of the major breadwinners may work in an industry that is on the decline, or within a company that is struggling.  Could they be laid off or face a salary reduction? Although the threat may not be immediate, it is credible and you have to factor that into your strategy.

One of my favorite parts of a SWOT analysis is finding opportunities.  In this section of your plan you can focus on ways to reduce expenses or generate more income.  One of my favorite Cambridge stories was when one of our counselors helped an elderly individual who was facing foreclosure.  They lived on a parcel of land they weren’t fully using, but it was zoned for agriculture.  The counselor recommended they use the land for that purpose.  Well, talk about your happy endings.  Not only did the individual avoid foreclosure and start a roadside farm, they hired two people to help.  Now that’s an opportunity that pays itself forward.  What opportunities are waiting for you? Now may be the best time to find out.

You don’t have to stress over money, but it’s very easy to get comfortable behind the 8-ball. Don’t let that happen. You can change how you look at the world, your family, and your financial situation by understanding the challenges in your path and creating a strategy to offset any impact they may have. If you want some help developing your SWOT analysis, contact one of our counselors today.  Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

It’s almost too easy to criticize banks. After all, they played a significant role in the collapse of the housing market and our subsequent economic woes; they almost always react in knee-jerk fashion toward earning reports; and most CEO compensation is tied to short-term stock performance. As a result, many executives turned a blind eye to the risks of their real estate products as they looked forward to record bonuses. And yet, the banking community really does have a lot to worry about when it comes to earnings.  The new overdraft and debit card transaction fee caps may cost the industry as much as $12 billion dollars.

Let’s look at how bank fees and interest rates impact one another.  According to a report by the financial consulting firm Oliver Wyman, it costs most banks between $200 and $300 a year to maintain a checking account. These costs cover staffing, overhead, and FDIC insurance premiums. Until recently, banks could offset these costs with fees collected from overdrafts and merchant account transactions. Today, banks are expected to earn, on average, between $85 and $115 in fees per year, per account. But that’s hard to do if the customer maintains a low balance. When that’s the case, a bank may actually lose between $85 and $185 per year, per account.

Imagine you were a bank facing a reduction in revenue.  You have three choices to offset those losses.  You can A) Close your doors, B) Introduce new products and services, or C) Raise fees and lower interest rates on money kept on deposit.  What would you do? Unfortunately, many banks quickly chose Option C.  In years past, most of us might have accepted the increases – no questions asked.  That’s no longer the case.  As you may recall, Bank of America abandoned its $5-a-month debit card fee in late October amid a firestorm of criticism driven by news stories and an outpouring of negative sentiment. So what can Bank of America do to meet customer needs and satisfy the expectations of its shareholders?  Once again, their answer seems to be Option C – raise fees and reduce interest rates on deposits.

You might not have realized it, but the average interest rate for deposits fell to 0.74% from 0.8% during the first six months of 2011.  This translated to a savings of almost $1.5 billion a month, industry-wide.   Some banks have also adjusted their minimum deposit requirements. For example, you formerly may have avoided monthly fees by maintaining a modest account balance, but you may soon be required to keep as much as $15,000 on deposit at certain banks.  A few banks are also testing charges for lost debit card replacement – $5, or $20 for rush delivery.  For those of you who make deposits via your mobile phone, you may soon receive a $0.50 fee for every transaction.  Or, if you withdraw too much from your savings account, you could incur an excessive withdrawal fee of $9.  Finally, some banks will even charge you to speak to a teller – an average of $1.  So much for new “products.”

If you’re encountering new fees, you should know that you have options.  Bank Transfer Day has put a spotlight on credit unions and how they can save their members a considerable amount of money.  According to the Credit Union National Association or CUNA, 650,000 people transferred more than $4.5 billion to Credit Unions in the month leading up to Bank Transfer Day.  Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

First, let’s take a look at why the Administration felt that a new program was needed.  In 2010, the total amount of student loan applications topped $100 billion.  When adjusting for inflation, students are borrowing more today than they did just 10 years ago.  Why? Tuition.  College education costs have risen steadily since the 1970’s, but much more so in the last few years.  In 2010 alone, costs rose an average of at least 5%, and some states have experienced increases of 15% or more. The accumulation of student loan debt has, for the first time ever, surpassed credit card debt, as total indebtedness approaches $1 trillion dollars. This has earned the graduates of 2011 the distinction of being the most indebted in history, with an average debt load of roughly $27,000. This burden has made repayment extremely difficult for many grads trying to make their entry into the working world, where, already, more than 1 in 10 grads are at least three months behind in payments.  Furthermore, the unemployment rate for college graduates aged 24 and younger has reached an all-time high of 9.4%.

Not only do these circumstances place an immense amount of stress on graduates, they also lead to the delay of life events promoting economic growth, such as the purchase of an automobile or home, and the pursuit of entrepreneurial endeavors.   In an effort to help offset financial uncertainty, the Obama Administration has released an Executive Order to change the timetable for President’s Bush Income Based Repayment (or IBR) student loan repayment option.  The existing law had set the cap at 15% of the borrower’s Adjusted Gross Income, extended the repayment period up to 25 years, and forgave any debt remaining after 25 years.  The new version, starting in 2012, will lower monthly payments to 10% of AGI and forgive the debt after 20 years.  Another portion of this initiative will allow borrowers with a Federal Family Education Loan Program and direct loan to consolidate these into one loan with up to a half percentage point lower interest rate.

The administration believes the changes could save some millions of borrowers a few hundred dollars a month – a much needed reprieve in the current economic cycle. However, if you’re interested in the program you have to consider the tradeoff. Although this program will help to make things comfortable for your financial situation, you will pay much more in interest over the 20-year term. For instance, I ran a projection on my own student loan debt under the program.  Initially, I gave a sigh of relief, as my monthly obligation would be reduced by over $250 a month; however, I would pay back close to double what I borrowed – ouch!   Would it make sense for me to use the program? That depends. If my monthly student loan payment exceeded what my Spending Plan allowed, I’d have little choice but to participate.  However, if I can make my regular monthly payments while being able to meet my other obligations and build savings, I would not benefit from the reduced monthly payment

To be eligible for a new income-based plan, you must have taken out at least one loan no earlier than 2008 and have at least one federal loan made in 2012. Contact your loan service provider to apply for IBR. If you don’t know who your lender is, you can look it up on the National Student Loan Data System. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

No one is arguing the fact that we are in the midst of an unprecedented housing crisis.  Nearly 6 million homeowners have lost their homes to foreclosure since 2007, and 2012 is on pace to be a banner year. Currently, about 11 million American own homes that are underwater, 4.7 million of which exceed HARP’s original 125% loan-to-value limit. To broaden the reach of HARP, the Administration plans to implement critical changes to entice both homeowners and banks to participate.  One of the more dramatic changes is the elimination of the 125% L-T-V limit.   Under the new program, homeowners who owe more on their homes than they are worth will be able to refinance no matter how much they are underwater.

The administration is trying to spur involvement by reducing or eliminating many of the fees typically associated with refinancing, such as appraisals and underwriting requirements.  Furthermore, fees will be reduced further for those homeowners who refinance into shorter term loans.  On the lender side of things, the Federal Housing Finance Agency is encouraging participation by eliminating liability.  Under HARP Classic, lenders were required to repurchase loans if the borrower defaulted – no surprise that banks were not initially inclined to participate. Lifting this requirement could give a big push to New HARP, providing people qualify.

To be eligible for New HARP, the homeowner(s) must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac, sold to those agencies on or before May 31, 2009. The property’s current loan-to-value ratio must be greater than 80 percent, which is no stretch in the current market. Homeowners may run into some issues with payment stipulations, however.  Under New HARP, the homeowner must have been current on their payments for the past six months, with no more than one missed payment in the past 12 months.  This could be tricky for folks who have endured additional financial setbacks due to economic conditions.   Finally, the homeowner’s credit must be strong enough to qualify for a new loan, again an issue that may prove challenging in our current climate.

Will New HARP make an impact? The short answer is maybe.  Detractors of the revitalized program call this more of an economic stimulus plan as opposed to a housing remedy.  The administration anticipates that the average HARP participant will save $2,500 each year.  That’s nothing to shake a stick at, but what will consumers do with those savings? Economists, and some within the government, believe these savings will be spent in the economy and help spur recovery. Because of the particularly vicious financial conditions, more consumers are saving, bulking up their emergency funds.  Many of us have experienced the debilitating effects of our current financial high-wire act, absent the all-important safety net of savings, and are not too eager to repeat that mistake.  A lot of that $2,500 may go into savings.

Furthermore, the plan does nothing to help the millions of consumers who are already in foreclosure, or who have fallen further behind than one missed payment in the last 12 months.  Sure, New HARP will help prevent some homes from falling behind, but what happens to those who are facing relocation and the stresses associated with the foreclosure process? This program doesn’t address that problem.  Finally, the biggest limitation of the revised HARP is that it is a voluntary program for lenders.  Although the administration has stripped the original repurchase clauses, banks are by no means required to refinance under HARP.

In the end, of course, only time will tell. The new HARP rules haven’t been finalized, but the administration hopes to release them by November 15^th. We’ll bring you more as information becomes available. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

Let’s face it, being a debt collector isn’t easy – especially in this economy. Some debt collectors make 300 to 500 phone calls a day to people who have little or no ability to pay. I don’t know about you, but if I had to make those phone calls I wouldn’t want to go to work. Most collectors empathize with people, and to be honest, they’re just doing their job. Other collectors take things to a whole new level. In 2010 the Federal Trade Commission received more than 140,000 complaints about debt collectors. The most common complaints involved calling a debtor repeatedly, misrepresenting the amount or status of a debt, and failing to notify consumers of their rights in writing. Sadly, the complaints lodged in 2010 painted a grimmer picture. According to the report, 49% of complaints alleged harassment, 16% reported abusive language, and 4% even claimed that the collector had threatened physical violence if they didn’t pay a bill.

Obviously, this behavior is unacceptable, but as I mentioned, this only represents a small number of debt collectors. If you’re unfortunate enough to get a call from a debt collector, I hope you’ll get someone who’s willing to work with you. If you don’t, let’s review the rights you have. According to the Fair Debt Collections Practices Act, bill collectors are not allowed to harass debtors by making repeated phone calls, use obscene language, or threaten you with arrest or violence. Furthermore, there are not allowed to contact you at inconvenient times. Typically, debt collectors are allowed to contact debtors between 8 AM and 9 PM, unless you have agreed to accept calls at a more convenient time, for example, if you work nights and don’t mind a call after 9 o’clock. You can direct the bill collector to stop calling you by sending them a cease-and-desist letter, but that won’t erase your debt. After receiving your letter, the bill collector is allowed to contact you to confirm your request and tell you the plan they intend to follow to recover the money you owe. This could include legal action, so be prepared.

When you begin your communication with a bill collector, you probably want to do a few things. First, get the debt collector’s name so you can research their agency. The Better Business Bureau reviews most collection agencies, and you can access this information by visiting www.bbb.org. It’s also important to verify the legitimacy of the debt. Let’s be honest, mistakes happen, and you don’t want to pay for a debt that isn’t yours. You have the right to ask for verification. This should include the name of the original creditor, the original account number, and the amount of debt in dispute. The bill collector should send those details to you within 30 days, and shouldn’t contact you until you’ve had a chance to review the information.  You should use that time to review your budget and determine how much you can afford to send every month. Remember though, the collector is paid on commission, so they’re going to try to get you to pay more than you can afford. You have to negotiate, in every sense of the word. And, unless you’re willing to deal with the credit damaging consequences, you should avoid the collector’s offer to settle the debt for less than you owe. That mark will be visible on your credit report for prospective lenders to see for the next seven years, and there may be tax implications, as well.

If you find that your debt collector has violated your rights, or that you’re dealing with a scam artist, contact the Federal Trade Commission at FTC.gov to lodge a complaint. Until next time, when I hope to have better news, I’m Thomas Fox for Cambridge Credit Counseling.