After being accused by New York Attorney General, Andrew Cuomo, of using illegal scare tactics to “terrify” indebted Americans into repaying their debt, a Buffalo, N.Y. debt collection agency run by convicted felons has been shut down by state authorities, The Los Angeles Times reports (“After TV Report, NY Authorities Shut Down Collection Company Run By Convicted Felons,” June 23, 2009).

“This company was run by people who lied, bullied, and preyed on vulnerable Americans struggling to resolve their financial situation,” Cuomo said. “Pretending to be a police officer, threatening to throw consumers in jail — these practices are despicable as they are illegal.”

Operating under the name Final Claims Asset Locators, among several other names, the debt collection agency had its collectors pose as law enforcement officials who told debtors they were being arrested.

In a recorded conversation, a debt collector even told a debtor, “Make sure you have somewhere for your kids to go. Lock up your house. Get some clean clothes, because you’re not coming home anytime soon.”

The debt collection agency was owned by a former drug dealer and convicted felon Tobias Boyland, who also went by the name “Bags of Money” and who served 13 years for armed robbery. Boyland was arrested this week on a weapons charge after authorities found him carrying a loaded, unlicensed pistol and after finding an AK-47 rifle and $34,000 in cash in his house.

Boyland also owns a modeling agency, has released a rap album, has written a self-help book called “Thug Motivation,” and has advertised his business on a billboard using an image of himself in a gladiator outfit.

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Popularity: 3% [?]

A quarter of U.S. employers aren’t able to keep up with the expense of matching employees’ 401(k) contributions, according to the results of a new Charles Schwab survey (“Employers Cutting Back 401(k) Plans, Study Shows,” Reuters, June 22, 2009).

401(k) plans allow workers to defer taxes on part of their income and invest that money in stock and bond mutual funds. Large companies like the ones surveyed by Charles Schwab, ranging in revenues from $100 million to more than $10 million, often match employees’ 401(k) investment contributions.

The constricted economy, however, has forced 23 percent of companies to stop offering 401(k) match opportunities, although many of the companies say this move will be temporary.

“They don’t see that as a long-term approach,” said Steve Anderson, head of Retirement Plan Services at Charles Schwab.

Workers with 401(k) plans, whose savings have taken a huge hit recently, typically pay close attention to their company’s matching program. In fact, 87 percent of employees polled identified 401(k) match as the most important feature of their company’s 401(k) plan. The second most important feature was access to advice on 401(k) investing.

The online survey also found that a quarter of companies are no longer offering open enrollment for 401(k) savings plans, limiting enrollment to certain employees.

Find information on debt relief and other debt management options at ThinkDebtRelief.com

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Popularity: 5% [?]

The International Monetary Fund has forecasted that the U.S. economy will contract 2.5 percent before the end of this year but will expand 0.75 percent by the end of 2010, according to analysis of the IMF’s World Economic Outlook report from April (“IMF Raises Forecast for U.S. Economy, Risk of Debt,” Bloomberg, June 15, 2009).

The Federal Reserve, the Obama administration, and Congress were all commended by IMF, the Washington-based lender that has helped rescue the economies of Pakistan and Iceland, for their efforts to salvage the economy with a “well-targeted” stimulus package.

In fact, the report showed that the stimulus package will raise the gross domestic product, the value of goods and services produced in the United States, by 1 percent this year and by 0.25 percent in 2010, pointing to the likelihood of a “gradual” recovery.

Despite the IMF predicting a solid upturn in the economy in the next year, it still sees the U.S. unemployment rate topping 10 percent next year and sees a successful exit plan from the financial rescue programs as essential to the country’s recovery.

“The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010,” the staff review of the IMF report stated.

The IMF projects that public debt will nearly double from 2009 to 2011 to 75 percent of the gross domestic product, putting significant pressure on the Treasury bond rates, which are currently low, making it easier for prospective homebuyers to get low mortgage rates.

Find information on debt relief and other debt management options at ThinkDebtRelief.com

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Popularity: 7% [?]

The Supreme Court has agreed to take on a case that addresses the constitutionality of a provision in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that restricts “debt relief agencies,” including lawyers, from advising their clients to take on additional debt before filing for bankruptcy, InsideARM reports (“Supreme Court Agrees to Hear Challenge to Bankruptcy Reform Law Provision,” June 9, 2009).

The section of the U.S. bankruptcy code in question was ruled to be in violation of the First Amendment by the U.S. appeals court in St. Louis in 2007 because the law “prevented lawyers from fulfilling their duty to clients to give them appropriate and beneficial financial advice.”

The court ruled that the law was passed as an attempt by Congress to stem lawyers’ abuse of the bankruptcy system but that language was too broad.

In fact, the court said, some clients might even benefit from their lawyers’ freedom to advise taking on certain types of debt, including a mortgage refinance, which can free up funds to help a consumer pay off other debt before filing for bankruptcy.

The language “would include advice constituting prudent pre-bankruptcy planning that is not an attempt to circumvent, abuse, or undermine the bankruptcy laws,” the court wrote (“U.S. Top Court to Decide Bankruptcy Advice Case,” Reuters, June 8, 2009).

In the Supreme Court case, which will be heard in October, the Obama administration is expected to argue that this provision of the Act can be viewed narrowly enough to allow debt relief agencies to advise their clients in anyway they see fit.

Find information on debt relief and other debt management options at ThinkDebtRelief.com

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Popularity: 7% [?]

Missouri Attorney General Chris Koster has taken legal action against a Texas debt settlement company, filing a lawsuit against Credit Solutions of America for illegally charging consumers for debt relief services the company never provided, his office announced in a press release last week (“Attorney General Koster Files Suit to Stop Company for Falsely Promising Credit-Card Debt Help,” June 2, 2009).

Credit Solutions of America, based in Richardson, Texas, advertised that it could cut consumers’ credit card payments in half, reduce their other monthly bills, and get them out of debt within three years, Koster says. But although the company collected hefty fees from consumers with the promise of delivering those debt reduction results, Koster charges that Credit Solutions of America never provided the advertised debt relief services, leaving its customers in a worse financial situation than before.

According to the Attorney General, Credit Solutions of America charged its customers fees that amounted to about 15 percent of their total debt, collecting those fees through an initial upfront payment and then through subsequent installment payments that it took directly from customers’ bank accounts.

The state of Missouri prohibits companies from collecting fees for credit services prior to the services being performed in full. Moreover, says Koster, the company wasn’t even legally registered to do business in the state.

“Credit Solutions of America promised real relief to consumers who were in financial straits because of high credit card debt,” Koster said. “We will continue to aggressively pursue the unacceptable business practices of these companies that offer false promises and deliver only harm.”

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Popularity: 9% [?]

A new report shows that consumers are charging less to their credit cards while also paying down the balances on those cards. (more…)

Popularity: 10% [?]

The credit scores of consumers in Nevada are tanking as Nevadans continue to struggle to pay their bills. The average credit score in the state has dropped 12 points since the first quarter of last year to 618 from the average score of 630 (“Nevadans’ Credit Scores Dip as Economy Tanks,” Reno Gazette-Journal, May 31, 2009).

This drop in the average credit score occurred at the same time that the state saw some of the highest delinquency rates nationwide on credit cards, mortgages, and auto loans.

In fact, Nevada had the country’s highest credit card delinquency rate, the second highest 60-day mortgage delinquency rate, and the eighth-highest delinquency rate for auto loans, according to TransUnion, one of the three major credit bureaus.

TransUnion’s director of consumer education, Steven Katz, said that given the state’s delinquency-rate trifecta, it’s not surprising that Nevadans’ credit scores are dropping.

“No. 1, you had people paying late,” he said. “No. 2, you had people applying for a lot of credit cards to pay their bill. And while all that is happening, the balance on all their accounts kept going up and up. All those things will pull down your score.”

Popularity: 10% [?]

Since January, employers have been more likely to scale back employee salaries than to eliminate positions, a recent survey reveals.

This shift away from job-cutting could be a sign that the nation’s 8.9 percent unemployment rate — the highest in 25 years — may be starting to level out, reports the Baltimore Business Journal (“Survey: More Employers Trimming, Freezing Salaries,” June 1, 2009).

The percentage of employers that have cut or frozen employee salaries has nearly doubled since the first month of 2009, from 27 to 52 percent, according to the most recent employer survey conducted by outplacement consultancy firm Challenger, Gray & Christmas.

Largely in response to a weakened economy, 86 percent of the companies surveyed in May said they reduced costs by freezing or cutting salaries, which represents a small decline from the 92 percent of companies who indicated in January that they’d implemented similar cost-cutting measures.

To cut costs, employers have also shortened employee work hours, imposed furloughs, eliminated tuition reimbursement programs, and made temporary layoffs.

John Challenger, CEO of Challenger, Gray & Christmas, suggests that temporary layoffs are a better cost-cutting solution for employers in the long-run than permanently eliminating positions.

“It is a lot easier to restore compensation and benefits,” he said, “than it is to rehire and retrain workers when the economy improves.”

Popularity: 12% [?]

After having settled predatory lending charges with 42 states, Bank of America has modified more than 64,000 home loans worth $823.5 million in principal and interest savings, with the intention of modifying loans and reducing interest rates for up to 100,300 borrowers, according to Bloomberg (“Bank of America Revises 64,000 Loans After Pact With States,” May 25, 2009).

The modifications, completed between December 2008 and March 2009, were part of an agreement with state attorneys general in California and Florida, among other states, over charges of predatory lending against Countrywide Financial Corp., which Bank of America acquired in July of last year.

The charges against Countrywide came in October after Bank of America had already taken over the country’s formerly largest home lender, resulting in a settlement that could ultimately end up saving almost 400,000 homeowners as much as $8.4 billion.

The settlement targeted subprime loans — typically offered to homeowners with the weakest credit — and adjustable rate mortgages, which allowed homeowners to make interest-only payments and defer payments on their loan’s principal balance.

Investors, who own 88 percent of the loans that may be eligible for modification under the settlement and who are wary of huge potential losses that may result from these mortgage modifications, are suing Bank of America in U.S. District Court in New York over who should pay for the modifications.

Popularity: 15% [?]

Two Arkansas women who have been sued for defrauding at least 139 people in a credit-repair scam have refused to respond to a judge’s order to pay $700,000 in penalties and have even started a new credit repair operation, the Arkansas Democrat Gazette reports (“State Wins Credit-Repair Fraud Case,” May 26, 2009).

For four years, Sherrye Mance and Tiffany Morris allegedly defrauded customers seeking the credit repair services of three of their companies. The women, who operated the three unincorporated businesses Financial Services Unlimited, Service Unlimited Inc., and Credit Counseling Service, have reportedly started running a new credit repair operation under the name “Fresh Start Credit Service.”

In a lawsuit, the Arkansas attorney general has accused Mance and Morris — who collectively owe their victims $127,565 — of charging customers for “services purported to improve a customer’s credit history, credit record, and credit ratings,” although these services were likely never “actually performed.”

Mance and Morris have, so far, refused to respond to the lawsuit, missed their court hearing, and failed to respond to a court injunction. Meanwhile, the Arkansas attorney general’s office has already started receiving complaints from California residents about the defendants’ new company.

Arkansas Attorney General Dustin McDaniel believes the two women still live nearby — Mance in a neighboring Arkansas county and Morris in Mississippi. McDaniel says he is exploring all legal options that would force the women to pay the penalty fees and repay the 139 affected customers.

Popularity: 15% [?]