Fair Debt Collection Practices Act – Supreme Court to Resolve Split in FDCPA Statute of Limitations Issue
The United States Supreme Court recently granted certiorari in a Third Circuit Court of Appeals decision to resolve the split in the circuits regarding an important statutory interpretation of the Fair Debt Collection Practices Act (FDCPA). The question is whether the statute of limitations in a FDCPA case starts when the alleged violation occurred (known as the “occurrence rule”) or when the consumer discovers the alleged violation (known as the “discovery rule”).
The Ninth Circuit held that the one-year limitations period in 15 U.S.C.S. § 1692k(d), part of the FDCPA, began to run when the would-be defendant violated the FDCPA, not when a debtor discovered or should have discovered the violation because the text of the statute stated that it ran from the date the violation occurred. That court affirmed the district court’s judgment.
However, Judge Thomas Hardiman wrote in his Third Circuit opinion of Rotkiske v. Klemm that the appeal required the Court to determine when the statute of limitations begins to run under the Fair Debt Collection Practices Act (FDCPA), and that the Act states that “[a]n action to enforce any liability created by this subchapter may be brought in any appropriate United States district court . . . within one year from the date on which the violation occurs.” Judge Hardiman noted that the United States Courts of Appeals for the Fourth and Ninth Circuits have held that the time begins to run not when the violation occurs, but when it is discovered. However, the Third Circuit disagreed, finding that the FDCPA, in its view, “says what it means and means what it says”: the statute of limitations runs from “the date on which the violation occurs.”
The appellant, Kevin Rotkiske, accumulated credit card debt between 2003 and 2005, which his bank referred to Klemm & Associates (Klemm) for collection. Klemm sued for payment in 2008 and attempted service at an address where Rotkiske no longer lived. The debt collector eventually withdrew the suit when it was unable to locate him. Klemm tried again in January 2009, refiling its suit and attempting service at the same address. Unbeknownst to Rotkiske, somebody at that residence accepted service on his behalf, and Klemm obtained a default judgment for roughly $1,500. Rotkiske discovered the judgment when he applied for a mortgage a few years later.
In 2015, Rotkiske sued Klemm and several associated individuals and entities asserting, inter alia, that their collection efforts violated the FDCPA. The defendants moved to dismiss his FDCPA claim as untimely. The U.S. District Court for the Eastern District of Pennsylvania agreed. The District Court rejected Rotkiske’s argument that the FDCPA’s statute of limitations incorporates a discovery rule that “delays the beginning of a limitations period until the plaintiff knew of or should have known of his injury.” The District Court found that the “actual statutory language” was sufficiently clear that the clock began to run on Defendants’ “last opportunity to comply with the statute,” not upon Rotkiske’s discovery of the violation. The Court also rejected Rotkiske’s request for equitable tolling as duplicative of his discovery rule argument.
Rotkiske appealed the judgment of the District Court, and a panel of the Third Circuit Court of Appeals heard oral argument in January of 2017. Prior to issuing an opinion and judgment, in September 2017, the Court sua sponte ordered rehearing en banc. Oral argument was held on February 21, 2018. After the hearing, the Court rendered its decision.
The Third Circuit Decision and Reasoning
Despite the “occurrence” language of the FDCPA, Rotkiske argued that the discovery rule applied. His argument was grounded in the text of the FDCPA, the policies underlying the Act, decisions of the Fourth and Ninth Circuit Courts of Appeals finding a discovery rule in the FDCPA, and decisions of the Third Circuit that applied a discovery rule to other federal statutes.
From the start, the Third Circuit “summarily” rejected Rotkiske’s assertion that the text of the FDCPA is silent on the discovery rule. While it is true that the Act does not state in haec verba that “the discovery rule shall not apply,” Judge Hardiman explained that the U.S. Supreme Court made clear in TRW Inc. v. Andrews, 534 U.S. 19, 28, 122 S. Ct. 441, 151 L. Ed. 2d 339 (2001), that Congress may “implicitly” provide as much. In that Fair Credit Reporting Act case, the Supreme Court held that Congress had “implicitly excluded a general discovery rule by explicitly including a more limited one.”
Judge Hardiman said that the same natural reading applies to the FDCPA in this appeal. “Congress’s explicit choice of an occurrence rule implicitly excludes a discovery rule.”
The judge provided a “quotidian” or everyday example to illustrate why this is so. When a bill states that payment is timely if it’s “received at the bank by 5:00,” it goes without saying that “a check arriving at 6:00 is late even if it was postmarked a week earlier.” The judge reasoned that “[s]hort of the express command that TRW tells us is not required, it is hard to imagine how Congress could have more clearly foreclosed the discovery rule.”
Rotkiske further argued about the remedial purpose of the FDCPA, which was enacted to thwart the national problem of abusive debt-collection practices. Rotkiske emphasized that “those practices may involve fraud, deception, or self-concealing behavior such that the failure to apply the discovery rule would thwart the principal purpose of the Act.” He cautioned that “[a]bsent the discovery rule, vulnerable consumers will be left without redress if the harm caused by debt collectors’ abusive or deceptive acts remains concealed for over a year.”
Judge Hardiman disagreed with this notion for two reasons. First, to the extent Rotkiske argued that the collection practices the FDCPA proscribes are inherently fraudulent, deceptive, or self-concealing, the statute belies his argument, the judge wrote. “Debtors are often vexed by overzealous or unscrupulous debt collectors precisely because of repetitive contacts by phone or mail.” Hardiman explained that as the language of the FDCPA makes clear, “many violations will be apparent to consumers the moment they occur.” The Act’s statute of limitations applies to all of its provisions, so the Court disagreed with Rotkiske’s suggestion to interpret the Act as if it contemplated only concealed or fraudulent conduct. Second, the Court held that to the extent that FDCPA claims do deal with “’false, deceptive, or misleading representation[s],’ nothing in the Act impairs the discretion district courts possess to avoid patent unfairness in such cases.” (emphasis by the Court). The Court of Appeals noted that equitable tolling remains available in appropriate cases.
Rotkiske asked the Third Circuit to follow the Ninth Circuit’s decision in Mangum v. Action Collection Service, Inc., and the Fourth Circuit’s decision in Lembach v. Bierman, both of which implied a discovery rule in the Act’s statute of limitations. However, Judge Hardiman said that the Third Circuit respectfully declines to do so.
Judge Hardiman explained that neither the Mangum or the Lembach opinion analyzed the “violation occurs” language of the FDCPA. In Mangum, the Ninth Circuit failed to engage the text of the Act. That court relied instead on its expansive holding in the 1998 opinion, Norman-Bloodsaw v. Lawrence Berkeley Lab., which held that “the discovery rule applies to statutes of limitations in federal litigation.” The Ninth Circuit did acknowledge that the Supreme Court had reversed its application of the Norman-Bloodsaw rule to the Fair Credit Reporting Act (“FCRA”) in TRW. Even so, after “brushing aside” TRW’s analysis as “food for thought . . . worth musing on,” the majority of the panel in Mangum concluded that TRW neither overruled nor undermined the Ninth Circuit’s prior precedent concerning the general applicability of the discovery rule.
Similar to the Ninth Circuit in Mangum, Judge Hardiman explained that the Fourth Circuit in Lembach also didn’t engage the statutory text when it determined that a discovery rule would vindicate the policies underlying the FDCPA. The Fourth Circuit in that case reasoned—without mentioning equitable tolling—that because plaintiffs “had no way of discovering the alleged violation,” the defendant “should not be allowed to profit from the statute of limitations when its wrongful acts have been concealed.” Based on the analysis in these two decision, Judge Hardiman and the Third Circuit declined to join either the Ninth or the Fourth Circuits in holding that the statute means something “other than what it plainly says.”
The judge noted that in addition to the opinions of the Fourth and Ninth Circuits in Mangum and Lembach, Rotkiske gave substantial weight to the Third Circuit’s 1994 opinion, Oshiver v. Levin, Fishbein, Sedran & Berman. Hardiman explained that in dictum in that case, the Court applied the discovery rule to Title VII—despite the fact that the statutory language required charges to be filed within 180 days “after the alleged unlawful employment practice occurred.”
Judge Hardiman said that the problem with Rotkiske’s reliance on Oshiver was that its dictum “is in obvious tension with the Supreme Court’s decision in TRW.” Instead of focusing on the statutory text—which the Third Circuit “relegated to a footnote”—the Court described a “general rule” that “the statute of limitations begins to run . . . [on] the date on which the plaintiff discovers” an injury rather than “the date on which the wrong that injures the plaintiff occurs.” (emphasis in original). The Supreme Court’s approach in TRW counsels in favor of reconsidering the Court’s earlier practice of presuming that federal statutes of limitations include an implied discovery rule. Indeed, the Judge said that to the extent that our decisions have relied on such a general presumption in applying a discovery rule to statutes that expressly begin to run when a violation “occurs,” they cannot be reconciled with the Supreme Court’s mandate that when “the text [of a statute] and reasonable inferences from it give a clear answer,” that is “the end of the matter.” Brown v. Gardner, 513 U.S. 115, 120, 115 S. Ct. 552, 130 L. Ed. 2d 462 (1994) (citations omitted).
Rather than imply a discovery rule by rote “in the absence of a contrary directive from Congress,” Judge Hardiman said that the Court must “parse each limitations period using ordinary principles of statutory analysis—beginning with the statutory text and then proceeding to consider its structure and context.” As part of that inquiry into context, he noted that “it may sometimes prove appropriate to consider whether there are ‘historical or equitable reasons’ to adopt either an occurrence or a discovery rule.” Rotkiske’s claim is not such a case, he held, because the text of § 1692k(d) plainly incorporates an occurrence rule.
The Third Circuit concluded its opinion by emphasizing that its holding “does nothing to undermine the doctrine of equitable tolling.” The Court already recognized the availability of equitable tolling for civil suits alleging an FDCPA violation. Judge Hardiman said the Court’s opinion shouldn’t be read to foreclose the possibility that equitable tolling might apply to FDCPA violations that involve fraudulent, misleading, or self-concealing conduct.
Thus, the Third Circuit—splitting from the Fourth and Ninth Circuits—held that civil actions alleging violations of the Fair Debt Collection Practices Act must be filed within one year from the date of the violation. Because Rotkiske’s action was filed well after that period expired, his action was untimely. The Third Circuit affirmed the judgment of the District Court.
Petition to the Supreme Court
In Rotkiske’s petition for certiorari, he argued that in TRW, the Supreme Court held the discovery rule does not apply to the FCRA. The Third Circuit held TRW’s methodology supported the its judgment. However, Rotkiske contends that TRW “actually counsels directly opposite to the Third Circuit’s conclusion.” The Supreme Court held in TRW that the FCRA’s embedded statute of limitations precludes application of the discovery rule. Put another way, TRW recognized that Congress in enacting the FCRA therein created—textually—its own statute of limitations paradigm.
But contrary to the FCRA, the FDCPA doesn’t contain an embedded statute of limitations. Rotkiske contended that, in comparing the FCRA with the FDCPA, the FCRA’s statutory limitations’ text should have required the Third Circuit’s contrary holding (i.e., that the discovery rule while applicable to the FCRA per TRW does not apply to the FDCPA as the FDCPA does not contain its own embedded limitations). Because the Third Circuit either ignored or improperly expanded TRW, Rotkiske asked the Supreme Court to reverse the judgment of the Third Circuit Court of Appeals.
In granting Rotkiske’s petition for certiorari, the United State Supreme Court acknowledged the significance in resolving the split in the circuits regarding this critical statutory interpretation of the FDCPA. Rotkiske v. Klemm, 890 F.3d 422 (3rd Cir. May 15, 2018), cert granted, 2019 U.S. LEXIS 1391, at *1 (Feb. 25, 2019).
Kurt R. Mattson is the President of Union Legal Research. He is the former Director of Library Services and Continuing Education at Lionel Sawyer & Collins in Las Vegas. Prior to this, he worked at BNA and other legal publishers, spending a substantial portion of his career working for Thomson Reuters. He serves as a consultant for several businesses, law firms, and marketing companies.
Kurt received his JD from William Mitchell College of Law and his Masters of Law (LLM) from George Washington University. He received his Masters of Library Information Science (MLIS) from Wayne State University.
Kurt is the editor of Lexis’ BSA/AML Update, co-author of A.S. Pratt’s Mortgage Procedure Guide to Federal and State Compliance, and author of Fair Debt Collection Practices: Federal and State Law and Regulation. He is also a contributing author of Brady on Bank Checks. Kurt is also a contributor to other business and legal publications.
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Few years back, the US news ran nationwide survey of around 1K consumers who said they have taken out debt consolidation loan. The survey actually asked consumers about debt, and why and how they got into this option. They were even asked about the effect of debt consolidation loan on their respective financial lives. These loans were always noted to be one good choice for over 60% of respondents. They indicate their loans have helped them lower the current monthly payments improve credit score and even helped in lowering or eliminating debt. Around 58% of respondents did not even compare pre-approvals from more than two lenders.
Used for managing all kinds of debt:
It is not hard to state that debt consolidation loans are used for managing all levels of debt you are in. respondents indicated that they actually used debt consolidation loans quite frequently for consolidating around $5000 to $10,000 worth of the debt. It was covering around 21% of respondents. There are some other respondents, who have used such loans for debt levels larger and smaller accounts, which can include $5K by 19% and over $50K by 15.3%. No matter how small or big the loan amount might be, debt consolidation came as a long time savior all the time. To know more about that, checking out some simple reviews will help you get to the core and procure some values now.
Over half of borrowers are actually consolidating credit card debt:
Credit cards happen to be the most common form of debt consolidated service with 56% of respondents indicating to have been using credit consolidation debt for covering credit card based debt. Student loans, personal or medical bills, and even payday loans are some of the other common examples of debt consolidation with loans.
- The largest challenge in paying for the debt has to be the interest. However, many people are getting such loans so that they have to deal with a single monthly payment with fixed or lower interest rates.
- Around 29% of the respondents have accumulated interest charges as the largest challenge for paying debts. Others were mainly challenged by budgeting for debt payments and keeping track of some of the accounts, paying timely and with inconsistent income.
- Under 30% of the respondents procured debt consolidation loan for losing interest rate ad manage to challenge accumulated interest based charges. However, consolidating into single monthly payment has popular motivation for getting debt consolidation loan with 35% of respondents. They indicate this point to be the main reason to get loan.
- Moreover, around 32% of respondents procured debt consolidation loan for the sake of lower monthly payment over here.
Came out with positive outcome for 63% of respondents:
For majority of the respondents, debt consolidation loan proved to be a good choice. Around 28% of them were able to lower monthly payments using the present debt consolidation loan. Around 27% of them lowered or eliminated debt through this help and the rest 9% improved credit score. But, that does not meant debt consolidation proves to be a good choice for everyone. Around 9% of them accrued more dent, 5% paid more overall interest rate and 2% lose their collateral.
How debt consolidation actually works:
Debt consolidation comes under two heads; secured and unsecured. The main difference between these two options is that secured debt loans use collateral while the unsecured ones do not. The latter one is more common but you can also use secured loan for unsecured debt too. The example goes like home equity loan used for the current credit card based debt consolidation.
Heading towards secured debt consolidation:
Secured debt consolidation based loans are available at physical financial institutions like credit unions and banks. They always watch out for collaterals like home equity for securing home equity loan and comprise of better interest rates than the unsecured ones. In case, you have any collateral and can match with the requirements, secured loan might help in saving some bucks on interest as you can pay down the debt.
- Home equity based debt consolidation loan is a form of secured debt loan offering you with fixed interest rates. The interest paid on home equity loan is mainly tax deductible but the credit card interests are not like that.
- Well, the home equity loans designed for debt consolidation can be a bit risky to consider as the home might end up being foreclosed if you fail to pay the loan on time.
- The danger remains if you eat up a major part of the home equity. Therefore, it is always mandatory for you to have plenty of cushions so if anything happens and you might have to sell your house or need to move, you don’t end up losing your place.
- The repayment term might be 10 years or more, and the home’s value might drop during that time. You might even owe more than the worth of your place. In case, you are facing any form of bankruptcy, credit card based debt remains unsecured and discharged more easily than home equity one.
The unsecured version of debt consolidation loan:
The unsecured debt consolidation does not need collateral and will have easier approval requirements when compared to secured based debt consolidation loan. The unsecured ones will have income requirements to be as low as $24K annually, and the debt to income ratios can be around 50% and minimum FICO score of the credit is 600.
These loans are primarily offered online through marketplace lenders and banks. It makes applying super convenient and easy, and some providers might even offer instant approval online. It means you will know immediately if the loan is likely to work for you or not.
Catch up with the best option whenever the matter is revolving around debt consolidation work. Based on the requirements, the unsecured and secured versions will work great for you. Be sure to learn more before finalizing on the implications over here.
Nobody in this entire world would like to be in the shoe of a person, drowning in debt. Everyone wants to get rid of it. Debt is no doubt costly and might prevent you from reaching any of your financial goals. Some people might consider credit card debt to be bad and student or mortgage loan to be good examples. The truth behind it is that having any form of debt means you are financially beholden to creditor and cannot put money in own pocket, until the obligations are met well. The market comes up with various options when you try to make decisions in eliminating debt. The legalized options under state and federal governments might work their way out as well.
Some legal norms to apply:
In case, you are drowning financially, you have legal rights to declare bankruptcy. The issue over here is that bankruptcy is always a serious derogatory mark on credit. It will not prevent you from procuring any credit in the near future and with time can actually make some credit products unavailable to you and others. It might come in hand at a rather steep price. Moreover, always know that not all debts can be discharged under the term bankruptcy, even if you want to. You might have to heard towards debt consolidation loan reviews for some best help over here.
- The next easy but harmful way is to ignore debt completely and make it foreign to you. Collection accounts will fall off credit report just after 7 years.
- At this point of time, delinquency stops just affecting credit any further. Then what is the catch here? The credit is the one over here, which is going to suffer drastically in the meantime.
- As you are legally obligated still to pay debt, the collector can easily pursue you until statute of limitations might run out in state where you actually live.
- The best strategy, which can prove to be the best choice for you, will solely depend on your own circumstances. The option over here is to pay off debt completely.
Credit card based debt relief:
You might have heard that some of the creditors are actually willing to settle debt for pennies right on dollar. The reality is somewhat a tad bit different. Credit card debt forgiveness is stated to be tricky and rare and can prove to be rather costly in nature.
- You might have to be first in some serious arrears. Then you can always convince creditors that you do not have to convince creditors that you do not have means to repay debt and the situation is likely to change a bit.
- If you can actually manage to work out of debt settlement agreement, the creditor is all but guaranteed to report forgiven debt to IRS. The forgiven debt is mainly considered to be taxable income around here.
- The current amount of tax that you actually owe on forgiven debt will solely depend on adjusted gross income and tax rate. Even if you fall under the low tax bracket, you can easily face huge bill to IRS.
The current debt settlement based process will involve long term and hard core debt collection attempts by creditors and some serious credit score damage to last for multiple years. Some of the major debt consolidation firms like Freedom Debt Relief or National Debt Relief can help you big time in terms of a fee. They might instruct you big time to stop paying bills and leaving you open to lawsuits by creditors.
Make ways to get out of debt at a faster rate:
In case, you are planning to pay off debt at a faster rate, the best way to do so is two-prolonged approach. You can follow anyone you like and things might work out best for you big time for sure.
- You can always make changes in the budget, like earn more and spend less. It can help you and afford you to pay more towards debt on monthly scale.
- You can further reduce cost of debt so that greater portion of each payment can be well applied to principal balance.
Catch up with the field of debt consolidation:
This process, in layman’s term, actually means taking out new loan, which is large enough for repaying some or all of outstanding debt. You get the money, pay off accounts and then make single monthly payment to pay off new debt.
- Debt consolidation helps in making perfect sense for people, willing to make one payment each month instead of going for several. It is for those people who can actually lower amount of interest they might have to pay by taking new loan.
- There are some online debt payoff calculators used for figuring out the amount and time you need for paying off debt completely and be debt-free for a change. It is a great way to check the number of years it takes to pay debt off, mainly with high interest credit card debt to make smaller and minimum monthly payments.
Be sure to pay off credit card based debt well and on time:
There are various ways to pay off credit card debt and taking debt consolidation loan is one of those proven ways. You can further take out home equity loan from mortgage lender or can try opening new credit card and then transfer balances over. The latter one might come with 0% of the introductory interest rate. It will provide various months or more for paying down balance interest free.
This solution is designed to help simplify the financial life or just lowering cost of the debt. It can work out on these two options together as well. The only thing to check over here is the kind of legal activities you have to follow and be sure of the norms to consider first. This will save you from any of the legal issues later on while associated with this procedure.
You cannot deny the fact that life is expensive. When the volume of those monthly payments and bills are threatening the day to day lives, trying to balance the finances can prove to be a difficult task. Therefore, it is not a rocket science to know that credit repair is actually taking a back seat to make the desired ends meet. Whenever you feel yourself deep down in debt and nowhere to go or find any help, debt consolidation seems to be the perfect solution to search for.
You cannot just start working on such relief help without any prior knowledge. You need to be aware of the laws involving this kind of loan relief help and work accordingly. A single mistake can land you in jail or burden you with more fees. To know how important debt consolidation is and how it can help you during crucial times, you are asked to get towards debt settlement reviews for help. Things will definitely start to work out well and right in your favor.
Time to learn more about debt consolidation section:
The current act of the debt consolidation is rather simple. Other than paying off various loans with different interest rates, the balances are actually lumped together right into single loan with fixed or lower interest rates. Most of the lenders might offer you with both assets based secured loans and some of the unsecured personal loans too. It is mandatory to know more about the differences before the matter gets out of your hand.
- The most common form of collateral for the asset based secured loan has to be the home equity of the borrower.
- Let’s take one example. The Larkins are known to have a current value of $45K of unsecured form of credit card debt. Even though they can make minimal monthly payments for help, the variable interest rates on each of their five separate credit cards will make it difficult enough to pay down the debt on time.
- Just for the solution, they actually decide to use the home as proper collateral for securing that $45K loan. The result comes with a fixed interest rate, making it easier for them to repaying the money on time and without any hassle at all. The current home equity loan will allow them well to pay off credit card based companies and focusing solely on one loan.
No matter whatever type of loan you are actually rooting for, the goal will always remain the same. It will revolve around one loan, resulting in one payment.
Checking on the pros to decked right in:
Along with adding to the security of the single loan in lieu of so many, there are so many benefits involving around the field of debt consolidation. So, you might want to get onto those points as well, before you end up with a cover under debt consolidation to work out with.
- Always remember that higher credit score is almost always the result from the lowered forms of credit card balances. You can safeguard that with the help of debt consolidation loan.
- It comes with a fixed interest rate. If not fixed, then the interest rate will definitely be a lower one. So, it will help you to pay less every month.
- You further have the proper ability to just pay down debt in an aggrieve manner with focus relatively on the primary credit card repair.
- Forgoing hassle of scheduling multiple payments on monthly scale is another benefit which comes with debt consolidation loan. It can further help you with avoidance of various late fees and even bad credit consequences, which will come handy with continued missed payments from your side.
- There are some chances of possible tax breaks too on the loan interest. If you ever decide to use the home equity or secure any second mortgage, debt consolidation will be of prime help in this regard.
- Moreover, you cannot avoid the ability to save some money right on emergency fund while paying the debt off in style.
Checking out on the cons:
Now, when it comes to debt and debt saving solutions, not all can be flowers and roses. There are some thorns in it as well. Just like any of the debt saving solutions, there are some issues revolving around the field of debt consolidation as well. So, just like you have learnt about the pros just now, it is great to jump into some cons as well. It will help you to make the right decision when the time demands so.
- You might have to pay more with every passing time. With lower interest rates, consolidation loans will come with lengthened payment terms. Even though you might have to pay less every month, the years added to loan life will force you to pay more with time. This is a point that you need to cater for.
- Plateaued interest rate seems to be another con to consider while dealing with this form of loan. The goal over here is likely to pay quite less every month and secure lower interest rate. It might be a bit difficult to find such rate that solves all kinds of financial troubles. Unless the current debt is likely to be attached to higher interest rates, it might prove to be wise to just skip consolidation.
- Secured loans can prove to be sometimes more preferable to unsecured ones. However, to make sure this option is what you have to deal with, guaranteed repayment is always important to know first. Remember that unpaid credit card debt can always subject to collections. On the other hand, any unpaid home based equity loan is dangerous and can give rise to foreclosure. So, make sure to think wisely about financial situation before putting your roof on line.
Going through the pros and cons will help you big time with the debt consolidation help. Now you know which one to choose and which one to say goodbye to.
According to debt.org, it is no secret that debt is now one of the most prevailing issues for millions of people in America, as more than 120 million Americans today deal with credit card debts spearheaded with outstanding credit card balances. With the ever-evolving interest rates along with the never-ending escalation in the housing, medical and other utility costs, more people are looking for debt relief programs. There are particular companies in the finance domain that render services in debt relief which deals with resolving debts for the clients and providing them with lower monthly payments.
Needless to say, when you hear such claims in the market, a part of you think that these are true, while the other part acts skeptical. There are certain agencies that run scams in the name of debt relief options, particularly debt consolidation and offer you debt management instead with a hefty upfront fee. However, opting for debt consolidation company that works under the bright daylight complying with the law and following the ethics is a great option especially when you are dealing with multiple debts at the same time.
Here is a guide that will help you in learning what to look in a debt consolidation company, the laws guiding debt consolidation and what to avoid.
What Is a Debt Consolidation Company?
The professional debt consolidation companies in the U.S. offer services in debt relief by helping you to combine your multiple loans and provide you with a new loan at a lower rate of interest. Such a program serves as an effective alternative to other solutions such as credit counseling, debt management, and debt settlement. Apart from that, when you work with a reliable debt consolidation firm, there is likely to get an expert’s help in negotiating with your creditors and resolve debt in a much effective manner, saving both your time and effort.
Debt Consolidation: FTC Rules and Regulations
FTC or the Federal Trade Commission has endowed a strict set of rules administering for-profit operating firms in the debt relief business. Also known as TSR or the Telemarketing Sales Rule, it is astutely designed to save consumers from unethical companies that appear to provide debt consolidation services. As there are many different aspects related to the laws surrounding debt consolidation, the most important TSR provisions are:
Avoid Paying Upfront Fees: Organizations cannot ask for a fee for their offerings until they have resolved the loans of the customer or provided what they had promised in the beginning. The consumer and the creditor must come to a written agreement regarding the settlement and the customer must make a single payment to the creditor prior to the collection of the fee by the debt consolidation firm.
Learning What You Are Getting: The debt consolidation firm must provide you with an overview of their offerings where they should grant information regarding how long will it take to achieve the results and what will be the estimated cost of the service along with the negative aspects of availing the program will be which varies according to the customer’s loan and credit situation.
Misleading Services: Organizations are strictly prohibited from making any sort of false claims about their programs in order to try to attract new customers. These unethical claims include their offerings and how much it costs, as well as, the overall success rate of the program so far.
Entrusting your financial future to the hands of a debt consolidation company may go wrong if they violate these rules and regulations. Hence, it is really important to rest assured of working with an organization that is known for its credibility in the market and has gained a huge debt consolidation rating.
Due to the changes laid out by the governing bodies, most of the unethical firms have fled the business. However, it is important to safeguard your financial future and keep these signs of a scam in mind when seeking assistance from a debt consolidation firm:
Guarantee to Eliminate All Your Debt
There are many questionable companies that will provide you with an assurance of paying off your debt effortlessly. However, it goes without saying that debt consolidation is an effective financial tool to get rid of multiple payments and a higher rate of interest; it is still a loan that you need to repay. A reputable debt consolidation establishment is outfitted with the motivation and desire to work hard and obtain the best result possible when it comes to client service. If you do not find a company that is being open and honest about its working procedure and results, it is a big red flag.
Claiming to Prevent Lawsuits and Creditor Calls
The beginning stages of debt consolidation are really eventful and challenging from both the ends of the company and the client. The debt consolidation program requires a great evaluation of your debts in order to combine them into one. The creditors, on the other hand, might keep calling you on a frequent basis or even threaten you with lawsuits. A professional firm will guide you throughout the procedure and address the concerns, but will never claim to prevent the collector calls or legal actions.
Advising You to Stop Interacting with Collectors
Even though it is easy and convenient for a firm to tell you not to be in touch with your collectors, it might not always be the best interest for your situation. A reliable debt consolidation firm leaves the decision up to you and they offer you guidance while communicating with the creditors. Besides, there are experts in the organization who also offer information on how to best manage any conversation you need to have with the collectors.
Finally, it is important to remember that it takes time to resolve your debts and take your finances at the exact position where you want them to be. This is largely determined with the type of debt consolidation company you work with that follows each and every rules and regulation laid out by the governing bodies.
So, you’re looking to find out the difference between Unsecured Loans and Secured loans, and what may be the advantages and disadvantages between the two. In todays article we’ll be discussing the simple differences between the two.
Collateral vs No Collateral
The first thing you may want to be aware of is collateral. This is the fundamental difference between the two loans; unsecured loans are loans that do not require any collateral in case you fail to meet your financial obligations, while secured loans are loans that are backed by the borrower and can end in your lender collecting possession of your property in the case you fail to meet your obligations.
The most common types of secured loans are Mortgages and Auto loans where you buy the equity off from the lender plus paying interest. Secured loans are personal loans that are widely available to help consumers make larger purchases they normally couldn’t afford otherwise.
Limits and Interest Rates
The next major difference between the two loans is the interest rates in relation to your borrowing power. You see, while you can get approved for high lines of credit via your credit card, using credit cards to pay off larger purchases is an extremely sub-optimal strategy for financially conservative reasons. In the case of using your unsecured line of credit to make bigger purchases you’ll have to pay back over a longer period of time, the interest rates of 24% or more can dig a big hole to fill even if you could purchase a vehicle or home with it.
That’s why it only makes sense that you would opt in for a secured loan that has interest rates as low as 4% depending on your credit score. Because in the time it takes to repay the loan you’ll have saved tens of thousands, to hundreds of thousands, of dollars with much better terms of repayment, all you have to do is back your purchase by collateral.
So the strategy is use Secured Loans for high and very high purchases.
Failing to Meet Your Financial Obligations
What happens when you fail to meet your financial obligations? Well each scenario is different. When it comes to failing to meet your financial obligation on an unsecured loan, typically the process heads into collections. In collections you will essentially be in negotiation with a debt collector to resolve the remaining debt on your account. It is still your obligation to pay back what you owe, and now you additionally will have a negative remark that will stay on your credit report for up to 7 years unless you look to get it removed.
When in collections, debt collectors have the right to sue you for the amount owed. In the case that judgement finds the debt collector in the right, you will then face similar consequences to a secured loan. Meaning that you may have wages garnished from you, property seized from you, including money in your bank accounts.
When it comes to secured loans, things are quickly able to move into collections should you fail to keep up with your financial obligations. But in case of any devaluation/depreciation along the way most secured loans also have you buy policies to cover the difference which results in additional fees.
If you are a fashion lover who is always enthusiastic about keeping abreast with the most upcoming trends in fashion, there is every possibility that you may be a shopping freak too. Even on a cash crunch, you may want to purchase the latest designer clothes or accessories.
Following the changing fashion trends and acquiring the latest in designer brands require a lot of money. There are many ways through which you can effectively borrow money and repay it in parts such as through a credit card purchase or cash advance of various modes.
It may be so that the most fashionable attire, designer boots, pair of stylish sun glasses, or the latest cell phones you owned may become obsolete over time, but the debt you owe would always be bogging you down. Mostly, the fashion freaks at their younger age are more prone to be troubled with such lingering debts when they struggle to clear mortgages and raise their families.
Most of them still get haunted by the so called fashion debt they acquired during their young age. Getting these coupled with the usual expenses to manage the monthly budget, it may create a vicious cycle of confusing and never-ending debts.
If you study the online market, you can easily find out that the leading fashion stores are doing business of billions of dollars through the e-stores, which makes it easier for the fashion lovers to get access to the latest designer products instantly. All these are easy avenues to purchase goods and push the users further into more debts.
Choosing the right path
While such payments become excessive, and you realize that it is impossible to handle with so huge interest rates, knowing about consolidation of debts may be good for you to get out of this chaos.
With the facility to do debt consolidation, you will be able to cut down the payment amount and also get the advantage of a lower interest rate. Consumer debt consolidation companies also may coordinate directly with the credit card service providers to lower the monthly payment and in turn bring down the total amount owed by you.
Upon getting the payment reduced, you are supposed to pay off the entire due in a single payment with the capital offered by the consolidator, and you can save a little money to clear your debt over time. You can also take help of expert like nationaldebtrelief
Debt consolidation for fashion freaks
Most of the times, the debts for fashion freaks may be related to various credit card repayments, in which the interest rates may be fairly high on defaulting. Once you opt for consolidation, calculate the amount you are actually paying out every month and weigh it against the monthly repayment of the consolidation loan to identify if it is an ideal option for you.
Even on choosing consolidation through Highline Credit, you need to remember that it is not a one-time fix to all your financial troubles. But you need to be very diligent about further spending on shopping as creating more debts will put you into deeper troubles.