fall 2018 “zombie debt”: run, hide, or stand your ground€¦ · credit report declined from...
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Consumer Credit Counseling
Service of Buffalo, Inc.
40 Gardenville Pkwy, Suite 300
West Seneca, NY 14224
(716) 712-2060 [phone]
(800) 926-9685 [toll free]
(716) 712-2079 [fax]
www.ConsumerCreditBuffalo.org
Twitter: @CCCSbuffalo
Community Counseling Centers
Please call
(716) 712-2060
to schedule an appointment
at any of our locations:
CCCS Main Office
Dale Association (Lockport)
Family & Children’s Service
of Niagara (Niagara Falls)
KeyBank (Buffalo)
Veteran’s One-stop Center
(Buffalo & Lockport)
This newsletter is a publication of Consumer
Credit Counseling Service of Buffalo, Inc.,
a not-for-profit agency. It is provided as a
source of information for clients, sponsors,
representatives of the credit industry and the
human service networks supportive of the
mission and vision of CCCS.
H ave you received a call or le er
demanding that you pay a debt that
either you forgot about, paid off or
previously se led, or is not even yours? You
may be a vic�m of “zombie debt
collec�on”. Zombie debts show up for a
number of reasons:
1. Some�mes they are debts that are
either very old or no longer owed; Past
the statute of limita�ons (SOL) for
egal ac�on in NYS, which is typically
six years.
2. You may have forgo&en about the
debt, or had previously se&led on the
debt with either the original creditor
or another collec�on agency.
3. The debt is a result of iden�ty the)
4. You filed the debt with a bankruptcy
filing and it has been discharged
The biggest issue is that people are
pressured into paying the debt, which they
may not need to pay. The first step is not to
acknowledge the debt but request
verifica�on that the debt is yours, and that
you may be required to pay. Let the
collector know that you would like to
validate the debt prior to discussing any
further; obtain their name and address…
then hang up the phone and end the
conversa�on.
Proceed to then send a debt valida�on
le er; cer�fied return receipt requested
(this way you know they received it). The
collec�on agency will have to give you
proof of the debt, such as the original
creditor with account number, the original
balance when sent to collec�on, any
interest or fees that have been charged,
along with any payments applied to the
debts since being sent to collec�ons, and
how to con�nue to dispute the debt, if
necessary.
Be advised that if you state knowledge of
the debt or agree to make a payment then
it could reset the statute of limita�on, and
you could be legally responsible for this bill,
even if it’s not yours.
“ZOMBIE DEBT”: RUN, HIDE, OR
STAND YOUR GROUND
FALL 2018
1
In this Issue: Page 1
“Zombie Debt” - Run, Hide, or Stand
Your Ground
Page 2—3
Just Released: Cleaning Up
Collec$ons
Page 4
‘Twas The Nights Before...
Page 5
Jared’s Five Financial Budge$ng Tips
Page 6
Pre-Purchase Homebuyer Educa$on
By: Sonya Goins-
Singletary,
CCCS Counselor
August 14th, 2018
Liberty Street Economics
By Andrew Haughwout,
Donghoon Lee, Joelle
Scally, and Wilbert can
der Klaauw
H ousehold debt balances con�nued their upward trend in the
second quarter, with increases in mortgage, auto, and credit
card balances, according to the latest Quarterly Report on Household
Debt and Credit from the New York Fed’s Center for Microeconomic
Data. Student loans were roughly flat, a typical seasonal pa$ern in the
second quarter. The Quarterly Report contains summaries of the
types of informa�on that is covered in credit reports, sourced from
the New York Fed Consumer Credit Panel (CCP). The CCP is based on
anonymized Equifax credit reports and is the source for the analysis
provided in this post, which focuses on an area that un�l recently has
received li$le a$en�on: collec�ons accounts.
Third-party collec�ons are quite prevalent; in the past ten years
alone, more than 40 percent of individuals with a credit report had a
collec�ons account at some point. And collec�ons accounts can
reflect an extraordinarily wide array of financial commitments—
although they certainly do reflect tradi�onal consumer debt balances
that have defaulted and been sold to third-party collec�ons firms,
there are also other types of unpaid debts—medical debt collec�ons,
rent payments, traffic �ckets, and even unreturned library books. In
the first paper that looked comprehensively at credit reports, Avery,
Bos�c, Calem, and Canner reported that in 2003, 52 percent of unpaid
collec�ons accounts were associated with medical debts and 23
percent were associated with unpaid u�lity accounts, while only
6 percent were associated with defaulted accounts sold by financial
ins�tu�ons.
The chart below, which is from our Quarterly Report, shows that
collec�ons accounts became more prevalent between 2008 and 2012
as Americans went through the financial hardships presented by the
Great Recession. But there has since been a declining trend in the
blue line which shows the percent of consumers (that is, Individuals
with an Equifax credit report) with a collec�ons account on their
credit report declined from over 14 percent to 12 percent between
2013 and 2017. But in the fourth quarter of 2017, that share suddenly
dropped to only 9 percent.
This sudden and sharp decline was an�cipated by those watching
the credit bureaus and had been discussed by the press in advance of
the change. The downturn was a result of a change in the required
repor�ng prac�ces that impacted collec�ons accounts specifically,
known as the Na�onal Consumer Assistance Plan (NCAP),
which rolled into effect during the second half of 2017. The plan has
many components, including(1) a requirement for more frequent,
detailed, and accurate repor�ng of collec�ons accounts, including
reflec�ng when those accounts have been paid; (2) a prohibi�on
against repor�ng debts that did not arise from an agreement to pay,
or from, medical collec�ons less than 180 days old; (3) the removal of
collec�ons accounts that did not arise from a contract or agreement
to pay; and (4) permission to report any account only when there is
sufficient informa�on to link the account with an individual’s credit
files (requiring a name, address, and some other personally iden�fying
informa�on such as a Social Security number or date of birth).
Impact on Collec ons Accounts Repor ng
Between June 2017 and June 2018—the �me period during which the
NCAP was implemented—the number of individuals with a collec�ons
account on their credit report fell from 33 million down to 25 million.
The number of collec�ons accounts reported also dropped
substan�ally, from more than 66 million collec�ons accounts at the
end of the second quarter of 2017 to about 47 million appearing on
credit reports in the second quarter of 2018. The aggregate
balances reported on collec�ons accounts also declined, by about
$11 billion.
Con�nued on page 3...
JUST RELEASED: CLEANING UP COLLECTIONS
2
Who Benefi�ed?
Here, we examine the individuals who had a decline in the number of
collec�ons accounts reported on their credit reports in the first
quarter of 2018. As may be expected, the majority of these
individuals had rela�vely low credit scores to begin with. Nearly
9 percent had no scores at all—mostly collec�ons—only credit
records too thin to actually be scored. And nearly 80 percent of the
individuals in this group had credit scores below 660 before the drop
in accounts, as shown in the chart below. Only a very small share had
very high scores. Overall, these individuals had higher delinquency
rates on other debts besides their collec�ons accounts—in fact,
33 percent of them had some kind of delinquency in their credit
accounts, compared to only 8 percent of everyone else.
A Mixed Impact on Credit Scores
We find that the impact on individuals of removing at least one
collec�ons account from a credit report was rela�vely small on
average. Because the vast majority of people in this group had very
low credit scores and flawed credit histories to begin with, the effect
of these collec�ons accounts being removed was modest overall, with
an 11 point increase in the Equifax Risk Score on average. However,
there is considerable varia�on in observed credit score changes. The
distribu�on of score changes is shown in the chart below:
Score Down:
About 20 percent of individuals saw a decline in their credit score,
very likely reflec�ng a worsening in other nega�ve aspects of their
credit history during the same quarter. This means that the credit
score change we report is not en�rely a$ributable to the removal of
collec�ons but would incorporate other possible contemporaneous
changes.
Score Up, a Li�le:
The most common impact of the NCAP was no change or a small
credit score increase—an average 11-point increase during the
quarter the collec�ons accounts were removed; just about half saw
an increase of less than 20 points.
Score Up, a Lot!:
However, a nontrivial 18 percent of affected individuals saw their
credit scores increase by more than 30 points. Those who saw the
largest boost to their scores were generally those with ini�ally very
low credit scores. For example, those who saw a 40 or more point
increase in their score began with a 529 on average, and ended with
an average of 588.
Disclaimer
The views expressed in this post are those of the authors and do not
necessarily reflect the posi$on of the Federal Reserve Bank of New York
or the Federal Reserve System. Any errors or omissions are the
responsibility of the authors.
For full ar�cle, please click: Just Released: Cleaning Up Collec�ons
JUST RELEASED: CLEANING UP COLLECTIONS
3
4
‘TWAS THE NIGHT(S) BEFORE...
A nother swiftly approaching holiday season… Have you
started planning yet? Well… if not, you likely aren’t alone. In less
than 3 months a busy schedule lies ahead; Family gatherings and
visiting relatives, attending parties and potlucks, entertaining the
kids while they are eagerly home from school, and of course…
Shopping. This should be the time of year to enjoy, and with the
right planning, of both your time and your finances, you can have
a great holiday season!
Like most successful endeavors, this will
start with a detailed plan. Ideally this
should happen earlier in the
year; whether you are pu(ng money
aside in a savings club, or purchasing gi)s
intermi*ently throughout the year.
Perhaps that wasn’t the case this
year, do not fret! You can s-ll have a
great holiday season if you focus your
a*en-on, and inten-ons, on these 5
specific recommenda�ons and �ps to
maximize your dollars:
1 Make a list, and check it twice. Determine the amount you
want to spend on each and every person, no matter the
price of the gift. Carry the gift list with you so you can keep track
of your purchases. This will help to limit your purchases to what
you initially planned and eliminate any impulse spending. Don’t
give in to discounts and sales if it means you will go over your
allotted budget.
2 Tame your expectations. This does not mean you have to
sacrifice or leave people off your gift list, but more of
in-depth look at your current personal financial situation to see
what you can comfortably afford. Perhaps you have to reduce
the amount you normally spend on your children, your
spouse, or your best friend. You shouldn’t feel bad, as almost
certainly your loved ones wouldn’t want you feeling unnecessary
financial distress over a few gifts. If you have children, you can
also use this as an educational experience by helping them
better understand the importance of family budgeting.
3 Get creative. Nothing is better than receiving a gift that
someone put thought and effort into, and the best way to
create that gift could be by making it yourself. This could be
artwork, pottery, custom-made CD’s, photo albums, or
something sweet like holiday cookies! You could also simply
spend quality time with a person by treating them to a
concert, ball game, or a movie. And never forget the emotional
value of a hand written note or card.
4 Shop around. There are many ways
that you can shop in order to save
money. If you are comfortable shopping
online, you can often find great value
through sales or online coupon sites
such as Groupon.com. If you feel it
would be worth investing the time and
potentially testing your patience to the
limits, Black Friday and Cyber Monday
could be great opportunities to net big
savings. Keep an eye out for sales year
round and take advantage…But only if
it’s on your list!
5 Don’t overextend yourself. While you may be sticking to
your list, you still need to make sure you are spending
wisely. Pay with cash as much as possible, and if you absolutely
have to use credit, limit to only one card. You don’t want to
worry about paying off your past purchases into the following
summer, as this could be the -me that you are planning for the
next holiday season! Now and go -ghten up your plan, put a bow
on it, and have yourself a wonderful holiday season!
By Robby Dunn
Vice President of Counseling
JARED’S FIVE FINANCIAL BUDGETING TIPS
5
By Jared Buckner,
CCCS Counselor
P��� ����
Bring your lunch, and dinner if need
be, to work in order to minimize
ordering out and buying food. You
have heard this �p before many
�mes, because it truly can save you
a lot.
C��� � ���
Save all that loose change you obtain
on a daily basis, or find in your car or
laying around your house. Put the
coins in a jar, can, or container and
try not to touch for at least 6 to 12
months. You’ll be surprised how
much you have saved. Use this
money to buy gi's, or treat yourself
to something nice.
C����� ���� �������
Limit yourself to only charging 30%
of the actual credit line on your
credit card, and pay off in full each
month if you are able. If you cannot,
be able to pay the balance off in a
few months’ �me. Refrain from using
the credit card un�l the balance is
fully paid off.
F�������� ���������
Educate yourself on financial
well-being topics by a0ending
educa�onal courses, whether it be in
person or on-line. Consider a0ending
a CCCS financial educa�on
workshop! :)
C������ �������� ������
This can be very difficult, but it is
vital in becoming financially stable.
Try and only purchase what is
needed, and limit purchasing “fun
stuff” or unnecessary items to a
quarterly or semi-annually basis,
while giving yourself a manageable
spending limit. It is natural to want
to treat yourself or splurge, but be
careful as you don’t want to put
yourself in a posi�on of financial
regret.
“It is a blessing and an honor to be able to assist the various people that walk through our doors, and
although we are not first responders, we help people and save lives every day, just like they do.”
-Jared-
CHIEF EXECUTIVE OFFICER
Paul C. Atkinson
PRESIDENT & CAO
Noelle Carter
BOARD OF DIRECTORS
Mark J. Mendel—Board Chair
Senior Vice President, M&T Bank
Customer Asset Management
Jason Houseman—Vice Chair
Vice President, Corporate Banking
Citizen’s Bank NA
John Eagleton—Treasurer
President, Steuben Trust Company
Nancy Blaschak—Secretary
Blaschak Consulting
Marylou Borowiak
Community Leader & Consultant
Karla Gadley
Community Development Officer—Senior Vice President, Five Star Bank
Anthony Gutowski
Vice President—Commercial Relationship Manager, Evans Bank NA
Nancy LaTulip
Vice President, Retail Banking Officer, Lake Shore Savings Bank (retired)
Kevin McNamara
Chairman, Millington Lockwood
Catherine Roberts
Senior Vice President—Community Action Organization of WNY
CCCS is a member of the National Foundation for Credit Counseling (NFCC), accredited by the Council on Accreditation of Services for Families & Children (COA), a member of the Better Business Bureau,
and is a certified HUD housing counseling agency.
6
PRE-PURCHASE
HOMEBUYER EDUCATION
C CCS of Buffalo understands that
purchasing a home can be a very
exci�ng �me, as well as a newfound
responsibility in your life. Whether one is
currently in the process of purchasing a home,
or just beginning to consider the idea of being a
homeowner one day, we can help you prepare.
CCCS of Buffalo offers a homebuyer educa�on
course via a free monthly workshop offered at
our main loca�on in West Seneca; typically on
the last Saturday of the month. The workshop is
six hours in length, covering topics such as
managing your budget, understanding credit,
the process of obtaining a mortgage, shopping
for a home, and managing your finances. The
course also can also be taken online. Upon
comple�on, individuals will be issued a
cer�ficate of comple�on which is o&en required
by federal, state, and local grant programs and
the First Home Club. In 2017, 182 individuals
par�cipated in our Pre-purchase/Homebuyer
educa�on. We are pleased to offer this service
to our community, and be of assistance in
helping them achieve their goal of being a
homeowner.
First Home Club
Schedule an appointment with a CCCS cer�fied
financial counselor to see if you may be eligible
for the First Home Club, a grant program
designed for first-�me home buyers. For every
$1 you save in a dedicated First Home Club
savings account, you will receive an addi�onal
$4 in matching grant funds, up to $7,500
towards the down payment and closing costs of
your home from the Federal Home Loan Bank of
New York.