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Fair Credit Reporting: 14.3.4 Practical Reasons Not to Respond to a Threat to Report a Debt

There is another important reason not to respond to creditor or collector threats concerning credit reporting. In almost every case, the reason a consumer is delinquent on a debt is that the consumer does not have enough money to pay all their obligations. Consumers must decide which debts to pay first. The collector’s threats are intended to get the consumer to pay its creditor’s debt first. This means that the benefits of paying debt “A” (the debt involving the threats) must be offset by any damage to not paying debt “B” because the money to pay debt “B” is now directed to debt “A.”

Fair Credit Reporting: 14.3.5 Paying a Debt Already Reported May Not Help a Consumer’s Credit Record

If a debt in collections has already been reported to a nationwide CRA, paying it will not remove the debt from the consumer’s credit report unless the consumer specifically negotiates for the removal.32 Absent an agreement to remove the debt, it will merely show as a paid collection account.33 The payment may or may not help a consumer’s credit score—this depends on which scoring model is being used.34

Fair Credit Reporting: 14.4.1 Overview

Withholding payment is an important self-help strategy for a consumer disputing a debt, whether it relates to the product or service or the crediting of the consumer’s payments. Withholding payment should always be explained in writing as a billing error dispute, to preserve the consumer’s rights (although in some cases this is not required if the withheld payment involves a credit card,35 it is advisable to do so).

Fair Credit Reporting: 14.4.2 Disputes Relating to Credit Card Charges

Federal law provides consumers with two different rights to dispute credit card charges and provides protections against the card issuer furnishing CRAs with adverse information during either type of dispute. In many disputes, the consumer can utilize either of these protections or both.

Fair Credit Reporting: 14.4.3 Telephone and Other Utility Charges

A consumer may wish to dispute many different types of utility charges—local telephone, long-distance telephone, cell phone, water, gas, electric, and cable, to mention the most common ones. Different utilities will involve different protections while the dispute is pending. Many utilities do not even furnish information to CRAs.

Fair Credit Reporting: 14.4.4 Home Mortgages and Home Equity Lines of Credit

A consumer can dispute the amount owed on various types of mortgage loans, without an immediate adverse effect on the consumer’s credit record, by first sending a “qualified written request.” This right applies to disputes regarding a home mortgage loan, a home improvement loan secured by the residence, a home equity loan, or another first or junior loan secured by the consumer’s dwelling.

Fair Credit Reporting: 14.4.5 Student Loans and Other Government Debts

Before delinquency on a government-backed student loan can be reported to a CRA, the consumer must have an opportunity to inspect and copy the records concerning the debt and to obtain an administrative review of the enforceability of the debt and whether the student loan is past due.47 The rule is similar for other types of debts owed to the United States.

Fair Credit Reporting: 14.4.6 Debt Being Collected by a Debt Collector or Debt Buyer

The Fair Debt Collection Practices Act (FDCPA) requires third-party collectors to provide consumers with a “validation notice” offering them the right to request within thirty days that the collector verify the debt. Where such a written request is made, the collector can take no collection action until it provides the requested verification.

Fair Credit Reporting: 14.4.7 FCRA Protections Where Consumer Disputes a Debt

For any type of credit, when a consumer disputes a debt, the creditor or collector, in furnishing information on that debt to a CRA, must include notice that the consumer disputes the information.54 In turn, the CRA must note the consumer’s dispute in any report that includes the information furnished by the creditor or collector.55 These rights are explored in more detail elsewhere in this treatise.56

Truth in Lending: 2.8.10.1 What Are Earned Wage Advances?

Earned wage advances (EWAs)761 allow an employee to obtain an advance of wages that have been earned but are not yet due before a scheduled pay date. The only true “earned wage” advances are offered by an employer or by a provider that has a partnership with the employer and can access the time and attendance system that tracks the hours an employee actually worked. In advance of a scheduled pay date an employee may obtain wage advances from such an EWA provider and have these paid into a designed account.

Truth in Lending: 2.8.11 Income Share Agreements

With an income share agreement (ISA), a consumer obtains funding in return for a promise to pay a percentage of future income for a period of time to the entity that advanced the funds. ISAs are typically marketed to students as a way of payment for educational services, though they have been used for other types of expenses as well. Providers often market ISAs as an alternative to traditional student loans. Some ISA providers claim, in both their marketing and on the face of their contracts, that these transactions are not loans and do not involve extensions of “credit.”

Truth in Lending: 2.8.12 Shared Home Value Appreciation Products

There are many versions of shared appreciation products. NCLC’s Mortgage Lending discusses them in detail.850 A common theme is that a homeowner receives a sum of money upfront and promises to pay the funder a percentage of the amount by which the property value has increased by a fixed maturity date or upon some other defined event. For example, assume that a contract says the funder is entitled to 25% of the increase in equity after thirty years, and the property is worth $100,000 when the contract is executed.

Truth in Lending: 2.2.2.1 The Term “Debt” Is a Critical Element of the Definition of “Credit”

As noted above, TILA defines “credit” as “the right granted by a creditor to a debtor to defer payment of a debt or to incur debt and defer its payment.”53 Unless some form of “debt” is involved, TILA does not apply to the transaction.

However, neither the Act nor Regulation Z defines the term “debt.” Potential sources of law for supplying that definition and the few court decisions interpreting term “debt” in the TILA context are discussed in this subsection.

Truth in Lending: 2.6.5.1 General

The obligation must be initially payable, either on the face of the note or by agreement when there is no written contract, to the creditor.214 This requirement was added in 1980.215 The requirement does not apply to open-end credit card plans.216

Consumer Arbitration Agreements: 10.1 Introduction

The majority of consumer arbitration agreements contain “class waivers” that expressly prohibit the consumer from enforcing their claims on a classwide basis.1 However, consumer litigants should not assume that every arbitration clause contains a class waiver and, when such an express waiver is absent, litigants should consider the benefits of demanding arbitration of class claims.

Consumer Arbitration Agreements: 10.2.1.3 When Agreement Delegates Arbitrability to the Arbitrator

Even when the availability of class arbitration is a question for the court and not the arbitrator, this rule is merely a presumption that can be overcome by “clear and unmistakable” language delegating the issue to the arbitrator.21 Standard language delegating to the arbitrator questions about the “scope” of the arbitration clause, or a reference to arbitral rules that give arbitrators that general authority, arguably overcome the presumption in courts that treat class arbitration as presumptively for courts to decide.

Consumer Arbitration Agreements: 10.7.2 Advantages and Disadvantages of Mass Arbitration

Enforceable arbitration agreements typically deprive workers and consumers of the right to redress their injuries through individual and class court actions and even through class arbitration, leaving only individual arbitration as an available procedure to obtain relief. But when damages are not large and thousands of workers or consumers are injured, individual arbitration is often not economically viable for a private firm attorney.

Consumer Arbitration Agreements: 10.7.3.1 Case Selection

Considering the resources and cost involved in mass arbitration, proper case selection is essential. Given the likely need to litigate at least some individual cases, the strength of the case on the merits will be quickly put to the test. Customary case selection questions must also be considered, such as whether the firm or co-counsel have the required resources, time, and expertise, and whether the defendant has the resources to pay an award.

Consumer Arbitration Agreements: 10.7.3.3 Marketing

Mass arbitration is viable when a firm’s cost to acquire large numbers of clients is reasonable. Lawyer advertising is generally constitutionally protected speech and entirely permitted in most jurisdictions. Know a jurisdiction’s rules—for example, New York and Florida impose some unusual restraints on lawyer advertising.

Consumer Arbitration Agreements: 10.7.3.4 Client Relationships

When the client has multiple contacts with the law firm before arbitration is initiated, it builds a relationship between the firm and the client, ensuring that clients understand that they hired a lawyer and why they did so, that are willing to engage in the relationship and the process, and that know what to expect. Cultivate real, if virtual, relationships with clients. Let them see the attorney’s face on video. “Chat” to them using email and text message mail merge, automated follow-ups, and the like.

Consumer Arbitration Agreements: 10.7.3.6 Arbitration Forum Selection

The applicable arbitration agreement may specify one or more arbitration forums, and typically the mass arbitration must be filed in the specified forum. When arbitration agreements do not specify a forum or allow for either AAA or JAMS as the forum, the attorney will have to decide between bringing the action before AAA or JAMS. One consideration is the relative quality of JAMS versus AAA arbitrators in a locality.