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Super-Charging Your Credit Counseling Program

April 5, 2017

www.thecounselorscorner.net


Get to Know Your Producer - Carolina Valderrama• Affordable Lending & Housing Outreach Senior.• Manages the CreditSmart® Program• Responsible for training and education of Industry professionals• Educates borrowers about alternatives to foreclosure• Works with servicers and housing counseling agencies to support

affordable and sustainable homeownership• Graduate of Nicholls State University with a degree in Mass

Communication. Holds a Post graduate degree in Paralegal Studies from The George Washington University and an Accredited Mortgage Professional Designation from the Mortgage Bankers Association.


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• Manager/Owner of the Mortgage & Credit Center, LLC• Creator of The Counselor’s Corner, Inc. an online training center for housing

professionals, with more than 4,000 members• Co-organizer of the first Florida Housing Counselor Network, statewide• More than 35 years of experience in mortgage & credit counseling and

training• National Consultant for many organizations, current faculty member of

NeighborWorks since 1994; provide training in the area of:ü Certification for ED’s and Program Managersü Housing Counseling Certificationü Foreclosure Preventionü Credit Counseling

• CreditSmart® trainer since 2001Disclaimer: I’ve made every effort to provide updated information for this presentation. However, today presentation is not a substitute for you staying abreast of industry changes and updates.

www.thecounselorscorner.net3

Get to Know Your Presenter – Cora R. Fulmore


The Counselor’s Corner…Your Online Resource for Housing Counseling and Real Estate Professionals

Your one-stop Resource Center• Provides information that enhances your knowledge of industry

changes and regulatory updates in a timely manner, all in one location • Our online “Learning Center” provides Continued Education Hours for

your active participation• Registration to TCC is “FREE”



The Counselor’s Corner supports the mission of the National Industry Standards in Foreclosure, Homeownership Counseling & Education.

•The Standards help practitioners and organizations serve families and communities in a consistent and professional manner.

•This webinar:ü Promotes consistent & quality counselingü Builds competency & knowledge of the housing professionalü Provides useable resources


National Industry Standards


GoToWebinar PlatformToll Number: 1-415-655-0052Access Code: 179-339-730Webinar ID: 122-303-059

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

& poll questions



Webinar Objectives:• Analyze key principles of Credit Counseling and identify

common credit barriers and how to work through• Evaluate major Consumer Protection Laws and why

knowing this information is important in credit counseling• Discuss ways to evaluate credit profiles• Identify helpful resources & tools for you and your clients



Poll Question

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



Poll Question

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


From November 2015 - January 2016 to November 2016 - January 2017 Georgia (59 percent), South Dakota (43 percent), and Mississippi (34 percent) experienced the greatest complaint volume percentage increase.

https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201702_cfpb_Monthly-Complaint-Report.pdf


Consumer Financial Protection Bureau



Consumer Complaints

• Consumers frequently complain about the processes for disputing information on their reports with consumer reporting companies.

• Many complaints indicate that consumers experience difficulties when submitting disputes through the phone and mail channels.

• Consumers sometimes report barriers to submission of disputes (e.g., authentication questions or customer service representatives that encourage consumers to contact the data furnisher first).

• After submitting disputes, some consumers claimed not to have received the results of their investigations or to have only received them after a lengthy delay.


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• Pay a $3 million penalty: Experian must pay a civil money penalty of $3 million to the Bureau’s Civil Penalty Fund.

• Truthfully represent the usefulness of credit scores it sells: Experian must inform consumers about the nature of the scores it sells to consumers.

• Put in place an effective compliance management system: Experian must develop and implement a plan to make sure its advertising practices relating to credit scores and on Internet webpages that consumers access through AnnualCreditReport.com comply with federal consumer laws and the terms of the CFPB’s consent order.

The full text of the CFPB’s Consent Order against Experian is available here: http://files.consumerfinance.gov/f/documents/201703_cfpb_Experian-Holdings-Inc-consent-order.pdf


Know the current CLIMATE



Federal Trade Commission study in 2015• Found that one in four consumers have potential mistakes on their

credit reports. • One in 20 may have errors significant enough to negatively impact how

much he or she pays for a loan, or whether credit is provided at all.



SOURCE: CFPB March 2017 Report


https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201703_cfpb_Consumer-Response-Annual-Report-2016.PDF


Fair and Accurate Credit Transactions Act

• Section 319 requires the FTC to conduct it’s first study of the accuracy and completeness of consumer credit reports.



FTC Study 2015

SOURCE: FTC Report to Congress under Section 319 of the Fair and Accurate Credit Transactions Act of 2003

In a Federal Trade Commission (FTC) follow-up study published in January 2015, consumer credit report errors remain a growing concern for most Americans.

Inaccurate information seriously impacts the cost of credit card debt, auto loans, insurance policies and other financial obligations. Poor credit also plagues our society and impairs a consumer’s ability to become a homeowner.



Low Scores – Experian Vantage Score



Poll Question

2. What’s the average credit score of the clients you serve?a. 650 - 700b. 600 - 649c. 550 – 599d. 450 - 549



Credit Counselors are not Attorneys • Know when to refer – you are not an Attorney• Many of your clients may be faced with collection accounts, civil

judgments, wage garnishment, defaulted student loan, levy on checking and or saving accounts.

• Some may be harassed by collection agencies and in fear of the IRS. Others are unsure about the new bankruptcy laws.



What is Credit Counseling?



Credit Counselor Demographics

National estimates for this occupation:v Industry Totals: 34,110v Average Salary: $49,480

SOURCE: https://www.bls.gov/oes/current/oes132071.htm#nat



Credit Counselors – by Area

SOURCE: http://www.bls.gov/oes/current/oes132071.htm



Ask the right QUESTIONS



Art of Questioning - Exploratorium

• Asking the right question is at the heart of effective communications and information exchange.

• Getting the answer to the right question, will give you the information needed to help your client.



1. Have you pulled your credit report lately? Is the information reported accurate? Check every section of the report i.e. identification information, tradelines (status, balance & limit), public records, inquires and understand the impact of the credit score reason codes.

Beware of the client who claims that everything is wrong or not their fault.

I would suggest they pull the FREE report from www.annualcreditreport.com or buy a report from www.myfico.com (cost is $19.95).

Top 5 Questions to ASK



Sample Credit ReportID Section


Tradelines Section

Reason Code

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2. Have you been sued? Are there any judgments (present or past)? If so, has the judgment been satisfied? Are your wages being garnished? Are there children in the household under the age of 18?

The answers to these questions will start to shape your action plan. Remember a judgment is a legal action a may require a referral to an attorney.




Consumer Data Industry Association - CDIA

• The CDIA, the trade organization that represents all three major credit bureaus — Equifax, Experian, and TransUnion — says they have agreed to remove from consumer credit reports any tax lien and civil judgment data that doesn’t include all of a consumer’s information. That information can include the consumer’s full name, address, Social Security number, or date of birth. The changes are set to take effect July 1.

• Roughly 12 million U.S. consumers should expect to see their FICO scores rise as a result of the change says Ethan Dornhelm, vice president of scores and analytics at FICO. The vast majority will see a boost of 20 points or so , he added, while some 700,000 consumers will see a 40-point boost or higher.



What is a JUDGEMENT?• A judgment is issued by the court stating that the creditor (or other plaintiff) has won the

lawsuit and is entitled to a certain amount of money. Once the creditor has a judgment against a consumer for a certain amount of money, the creditor can employ a host of methods to collect the money that are unavailable without a judgment.

• The judgment must be filed with the court clerk -- and this usually happens a day or two after the judge issues it.

• PLEASE REMEMBER, YOU ARE NOT AN ATTORNEY.• If a client is being sued, please refer to an attorney. Some attorneys may offer free

services or charge a reduced fee. There is also legal aid and legal clinics in most markets. • Servicemembers should consult their local JAG office.



Garnishment vs. Levy• A garnishment or wage attachment is an order from a court or

a government agency that is sent to the employer. It requires the employer to withhold money from the employee’s paycheck and send the money directly to the creditor.

• A levy is when the creditor enacts a levy against the borrower’s account, it means the creditor freezes a financial account and then usually takes the money in the account to cover the debt. The creditor then takes any future money that’s deposited into the account until the debt is paid off in full.



3. Are there any repossessions in your file? If so, did the lender sell the vehicle?

Usually the balance reported on a repossession is the balance at the time of the repo. Once the car is repossessed it’s usually sold. Your client should always verify the balance.




4. When did you stop making payment? Have you agreed to a payment arrangement?

If the client’s interaction with the creditor has not been pleasant, this could make your job difficult. Determine if there are any landmines that will derail your efforts.




5. Have you filed bankruptcy? When was it filed? What type -chapter 7 or chapter 13? Was the bankruptcy discharged or dismissed?

REMEMBER NEVER SUGGEST THAT A CLIENT FILE BK. If it’s needed, you might suggest that they seek legal counsel. Make sure that you are aware of what debts were included in the bankruptcy.




Discharged or Dismissed• A discharge means that all the requirements set by the court have been met by the

debtor. ü In a Chapter 13 bankruptcy this means that all the debtor’s payments have been

made in full and on time. ü For a Chapter 7 bankruptcy it means that all the creditors and unsecured debts listed

in the bankruptcy petition (filed with the Court) have been wiped out.

• A dismissal is not the desirable outcome for a debtor. A case can be dismissed for many reasons like not being able to afford the Chapter 13 payments because life circumstances have changed (i.e. job loss, etc.). In either type of bankruptcy, not completing required credit counseling and financial management courses could cause a dismissal as well as if the case was improperly filed.



Knowledge Checkpoint QuestionThe maximum amount that can be garnished from a pay check is _______ percent?

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



Know the LAWS



The Consumer Protection Laws You Must Know and Why?



Fair Credit Reporting Act• adverse action was taken against a consumer; because of information in the credit

report profile; • they are a victim of identify theft and place a fraud alert on their file;• their file contains inaccurate information as a result of fraud;• they are receiving public assistance;• they are unemployed but expect to apply for employment within 60 days.• In addition, the FACT Act in September 2005 all consumers will be entitled to one free

disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies.

Consumer Rights: entitled to a free credit report if:



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

old, or bankruptcies that are more than 10 years old.



Poll Question

3. Which credit reporting vendor has the most comprehensive file in your market?

a.Equifaxb.Experianc.TransUnion



Equal Credit Opportunity Act• This regulation prohibits creditors from discriminating against credit applicants on

the basis of race, color, religion, national origin, sex, marital status, age, because an applicant receives income from a public assistance program, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act.



Fair Debt Collections Practices Act• Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using

abusive, unfair, or deceptive practices to collect a debt.• Under the FDCPA, a debt collector is someone who regularly collects debts owed to others.

This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.



A debt collector, in collecting a debt, may not harass, oppress, or abuse any person. Specifically, a debt collector may not • Use or threaten to use violence or other criminal means to harm the physical person,

reputation, or property of any person • Use obscene, profane, or other language that abuses the hearer or reader • Publish a list of consumers who allegedly refuse to pay debts, except to a consumer

reporting agency or to persons meeting the requirements of section 603(f) or 604(3) of the FDCPA

• Advertise a debt for sale to coerce payment • Annoy, abuse, or harass persons by repeatedly calling their telephone number or

allowing their telephone to ring continually • Make telephone calls without properly identifying himself or herself, except as allowed to

obtain location information

FDCPA



Fair Credit Billing Act• This law applies to "open end" credit accounts, like credit cards, and revolving charge

accounts, like department store accounts. It doesn’t cover installment contracts —loans or extensions of credit that’s repaid on a fixed schedule.

http://www.consumer.ftc.gov/articles/0219-disputing-credit-card-charges



Knowledge Checkpoint QuestionUnder the Fair Credit Billing Act (FCBA), the consumer must file a dispute within ______ days?

Within 60 days after the first bill with the error was mailed.

The creditor must acknowledge your complaint, in writing, within 30 days after receiving it.

The creditor must resolve the dispute within two billing cycles (but not more than 90 days).



Truth In Lending Act• The most important aspects of the act concern the pieces of information that

must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower.

• It requires lenders to provide you with loan cost information so that you can comparison shop for certain types of loans.


https://s3.amazonaws.com/files.consumerfinance.gov/f/201503_cfpb_truth-in-lending-act.pdf


Thoroughly understand the CREDIT REPORT



Not all formats are the same

But all formatsprovides the samebasic information.



Key things to look for• Dispute any variations in the name• How should you dispute:

“The address reported on this account is incorrect. I have never lived at this address. Please remove this information immediately.”



Inaccurate Information

• Inaccurate address information can bring inaccurate tradelinesinformation

• I’ve never lived at this addressL



Verify the trade line information



Understand the impact of activity on the SCORE• Inquiries• Tradelines – Verify its accuracy

üBalance, date the information was reported, status/rating, history


FDCPA Applies to Debt Collectors, Not CreditorsThe FDCPA applies to debt collectors only, not to creditors collecting their debts. However, some states have laws that

restrict what creditors can do when collecting debts.

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Using Trending Data

• As it stands, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages or student loans.

• Through trended credit data, lenders can access the monthly payment amounts that a consumer has made on these accounts over time.



What type of credit user are YOU?


Research shows that information is an important predictor of risk. • Revolvers are three times more

likely to default on new credit cards and auto loans and five times more likely to default on current credit cards

• Transactor -- those who actively pay down their balances -- are a lower risk than those who just make the minimum payment.

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CFPB reports Invisible & Unscored Credit

http://files.consumerfinance.gov/f/201505_cfpb_data-point-credit-invisibles.pdf

• More than 26 million consumers are effectively "credit invisible" because they have no credit record and another 19 million are "unscored" because they have an insufficient or stale credit history.



Next subprime bubble to burst: Auto Loans

• The auto finance market has grown significantly in the past few years. According to Experian Automotive, outstanding auto loan balances reached a record-breaking $870 billion in the third quarter of this 2014, an increase of 9.9% and 24.5% over the same periods in 2013 and 2012, respectively.

• As of the end of the third quarter of 2014, loans to consumers with below prime credit comprised 38.7% of open accounts, totaling over $336 billion.

http://www.responsiblelending.org/other-consumer-loans/auto-financing/research-analysis/recklessdriving_implications_subprime_autofinance_growth.pdf



Auto Loan 60 day + Delinquencies



Student Loan Debt



The Knowledge Gap• 40 million consumers have at least one student loan • 7 million borrowers are in default • 11.5 percent of student loans were at least three

months delinquent


https://attendee.gotowebinar.com/register/3821519069769996803

Navigating the Student Loan Maze4-part Series starts May 4th


Step One: Identify the type of Student LoanFederal Direct Loans

• Stafford is the most common federal loan received. Either the federal government or a third-party will offer these loans. There are two types: subsidized or unsubsidized. - Subsidized – Will not charge interest until after borrower leaves school. - Unsubsidized – Interest is charged from the time the loan is disbursedThis loan type has a 6 month grace period after the borrower leaves school or drops below half time enrollment.

• Perkins are a type of subsidized student loans, with a fixed interest rate of 5% that does not start accruing interest until repayment starts, typically 9 months after graduation. These loans are guaranteed by the U.S. Dept. of Ed, however administered by the schools.

• PLUS acronym for Parent Loans for Undergraduate Students, also made to students, interest 7.9%; credit is a consideration. Has no grace period and the interest is not subsidized.

• Consolidation loan allows the borrower to combine several existing loans into one new loan with a fixed interest rate and (generally) a longer term.



Private Student Loan Types

• Private student loans generally come in two types: üSchool-channel üDirect-to-consumer• School-channel loans has the lowest interest rates but generally take longer to

process. School-channel loans are "certified" by the school, which means the school signs off on the borrowing amount, and the funds are disbursed directly to the school.

• Direct-to-consumer private loans are not certified by the school; schools don't interact with a direct-to-consumer private loan at all. The student simply supplies enrollment verification to the lender, and the loan proceeds are disbursed directly to the student. While direct-to-consumer loans generally carry higher interest rates than school-channel loans, they do allow families to get access to funds very quickly — in some cases, in a matter of days.



• The grace period is a set period of time after the borrower graduate, leave school, or drop below half-time enrollment before they must begin repayment on the loan.

• The grace period gives the borrower time to get financially settled and to select the repayment plan.

• Not all federal student loans have a grace period. • For most loans, interest will accrue during the grace period.

Step Two: Has the Grace Period Expired



Step Three: Know the Options

• Repayment Plan- Income-Based Repayment (IBR)- Income-Sensitive Repayment Plan

• Deferment• Forbearance• Loan Consolidation• Rehabilitation• Standardized Compromise and Write-Off • Special Programs for Military• Forgiveness or Cancellation of Debt



• Closed School Discharge. If the college closed while the borrower was in attendance or up to 90 days after withdrawal

• Unpaid Refund. If borrower withdrew and the college owed a refund but never returned the funds to the lender

• False Certification Discharge. If the college improperly certified the borrower’s ability to benefit from a higher education or the borrower is a victim of identity theft


Loan Cancellation• Death Discharge.

If the borrower (or the student for whom a parent borrowed a Parent PLUS loan) dies

• Total and Permanent Disability Discharge.If a doctor certifies that the borrower is totally and permanently disabled, or if a veteran is unemployable due to a service-connected condition.

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Loan Forgiveness for Public Service Employees • In 2007, Congress created the Public Service Loan Forgiveness Program to encourage

individuals to enter and continue to work full-time in public service jobs. • Under this program, borrowers may qualify for forgiveness of the remaining balance due on

their eligible federal student loans after they have made 120 payments on those loans under certain repayment plans while employed full time by certain public service employers.



Resources• FinAid.org

www.finaid.org/loans

• Federal Student Aid www.myeddebt.com

• Student Loan Borrower Assistance Projectwww.studentloanborrowerassistance.org

• Federal Student Loan Consolidationloanconsolidation.ed.gov

• US Dept of Education’s Debt Collection Servicewww.ed.gov/offices/OSFAP/DCS

• FSA Ombudsman www.ombudsman.ed.gov

• CFPB [email protected]

• Public Service Loan Forgivenesswww.studentaid.ed.gov/publicservice

• NSLDS www.nslds.ed.gov



Student Loan ResourcesGeneral Servicing Information• Electronic Announcement – Loan Servicing Information

http://www.ifap.ed.gov/eannouncements/032610LoanServicingInfoFedOwn.html

Income-Based Repayment (IBR) Plan• IBR Fact Sheet http://studentaid.ed.gov/students/publications/factsheets/factsheet_IncomeBasedRepayment.pdf• IBR Q&A http://studentaid.ed.gov/students/attachments/siteresources/IBRQ&A_template_123109_FINAL.pdfPublic Service Loan Forgiveness Program• PSLF Fact Sheet

http://studentaid.ed.gov/students/attachments/siteresources/LoanForgivenessv4.pdf• PSLF Q&A http://studentaid.ed.gov/students/attachments/siteresources/PSLF_QAs_final_02%2012%2010.pdfDelinquency and Default Management• Electronic Announcement – Delinquency Prevention Activities

http://www.ifap.ed.gov/eannouncements/060310LoanServicingInfoDelinqPreventAct.html



Garnishments Resources• Administrative Wage Garnishment (AWG) Garnishment Calculator

https://fiscal.treasury.gov/fsservices/gov/debtColl/dms/xservg/awg/debt_awg_calc.htm/

• If Your Wages Are Garnished: Your Rights” http://www.nolo.com/legal-encyclopedia/if-wages-are-garnished-rights-33050.html

• Your State Garnishment Lawshttp://www.nolo.com/legal-research/state-law.html

• Head of Household Exemptions http://www.nolo.com/legal-encyclopedia/what-is-the-head-household-exemption-wage-garnishment.html

• NOLOhttp://www.nolo.com/legal-encyclopedia/if-wages-are-garnished-rights-33050.html



Consumer Laws ResourcesvFair Credit Reporting Act – Summary

https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf

vEqual Credit Opportunity Act http://files.consumerfinance.gov/f/201306_cfpb_laws-and-regulations_ecoa-combined-june-2013.pdf

vFair Debt Collection Practices Act http://www.consumer.ftc.gov/articles/0149-debt-collection

vFair Credit Billing Acthttp://www.consumer.ftc.gov/articles/0219-disputing-credit-card-charges



Additional Resources• CreditSmart for housing professionals – http://www.freddiemac.com/creditsmart/

• CreditSmart for consumers –http://www.freddiemac.com/creditsmart/consumer_training.html

• Freddie Mac Housing Professionals Resource Center Subscribe –http://www.freddiemac.com/singlefamily/housingpros/subscribe.html

• Free credit report – https://www.annualcreditreport.com/index.actionØ Equifax – 1-800-685-1111 – http://www.Equifax.comØ Experian – 1-888-397-3742 – http://www.Experian.comØ Trans Union – 1-800-888-4213 – http://www.transunion.com



Military Resources• SCRA Public Law December 19, 2003

http://www.gpo.gov/fdsys/pkg/PLAW-108publ189/pdf/PLAW-108publ189.pdf

• Armed Forces Legal Assistance Program Office –http://legalassistance.law.af.mil/content/locator.php

• CFPB Servicemember protections –http://www.consumerfinance.gov/blog/servicemembers-you-have-new-mortgage-protections-in-2014/



To know the programs and the options to assist in your client’s coaching and counseling needs.


What’s your Responsibility?

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The Counselor’s Corner…Your Online Resource for Housing Counseling and Real Estate Professionals

Your one-stop Resource Center• Provides information that enhances your knowledge of industry changes and regulatory updates

in a timely manner, all in one location• Our online “Learning Center” provides Continued Education Hours for your active participation

Please make sure that your entire counseling staff is registered on the site!



Questions?



Super-charging Your Credit Counseling Program

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