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.

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

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Popularity: 3% [?]

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: 9% [?]

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: 12% [?]

The credit crisis has taken its toll on many consumers’ immediate ability to borrow and pay down their debt as, over the last year, banks and other lending institutions have slashed credit limits and hiked interest rates in an effort to protect themselves from rising consumer defaults. But economists predict that this vastly altered consumer credit market won’t be a fleeting change.

“In the previous two decades, our credit scores have become more important over time,” said personal finances expert Liz Pulliam Weston (”Rules Have Changed for Consumer Credit,” Chicago Tribune, April 19, 2009). “Then in the past year, it’s suddenly become critical.”

She warns that if consumers don’t pay attention to these recent credit developments they could make some costly mistakes that could negatively affect their personal finances.

1. Credit Scores

The overhauled credit markets have polarized the world of credit scores: now there’s good credit and bad credit and relatively little in between. Consumers with good credit have seen little to no effect on their financial lives, while consumers with less than stellar credit are increasingly facing higher interest rates, more stringent loan terms, and disqualification from all types of loans — home, auto, student, etc.

The Recommendation: Don’t take on any more debt and start paying off your existing debt.

2. Credit Benchmarks

The qualifications for good credit and bad credit have also shifted. About a year ago a 700 to a 720 FICO credit score — the most widely used credit score formula — was considered acceptable for most consumer loans, and a 620 FICO score was considered subprime and subject to less favorable terms. Today, consumers need a 740 to a 760 credit score to get the most consumer-friendly loan and credit card terms, and consumers with a 660 to 680 score are considered subprime.

The Recommendation: Pull your credit report to see if there are any unforeseen blips or mistakes that could have dinged your score. You can get a free copy of your credit report from each of the major reporting bureaus once a year at annualcreditreport.com. For a free estimate of your credit score, you can use some of the new credit simulators at Bankrate.com, Quizzle.com, or Credit.com to get an idea of where you stand, but if you’re considering taking out any new loan you may want to use a site like MyFICO.com to pull your actual credit score and see where you really fall on the new scale.

3. Credit Limits

Consumers with lower credit scores are having their credit limits slashed by credit card companies, which can severely throw off your credit utilization ratio — the ratio of your available credit to how much you’ve borrowed — and consequently, lower your credit score.

The Recommendation: Consumers with good credit scores, 750 and above, can try negotiating with their creditors to reinstate lines of credit, if need be. Creditors are more willing to accommodate consumers with good credit since they are harder to come by in this recession.

4. Card Cancellations

In addition to lowering limits, credit card companies are shutting down lines of credit due to low use, which may be one of the few credit changes to hurt consumers with good credit.

The Recommendation: Make sure to occasionally use the cards that you keep in the “back of your wallet” — charging some purchases at least a few times a year — and promptly pay off the balances on these cards in full.

5. FICO Score Formula Changes

One of the three major credit reporting bureaus, TransUnion, has begun using Fair Isaac’s new FICO score formula, which places more emphasis on your credit utilization and ignores overdue balances of less than $100. It’s unknown when or if the other credit bureaus, Equifax and Experian, will follow suit.

The Recommendation: Keep balances to below 30 percent of your available credit, and if possible, try to bring your credit utilization down to 10 percent to get better interest rates and more favorable borrowing terms on consumer loans.

Popularity: 11% [?]

Americans may want to mark Feb. 14 on their calendars for a reason besides Valentine’s Day; it’s the last day consumers will be able to access their FICO credit scores on myFICO.com with Experian credit data included, The New York Times reports (more…)

Popularity: 9% [?]

A recent report from the U.S. Commerce Department shows that recent changes in consumer spending and saving habits — a decline in household debt and a rise in household savings — may become the behavioral norm for American consumers. (more…)

Popularity: 7% [?]

Hoping to offer lenders a more effective way of predicting which consumers are likely to default on their accounts, the Fair Isaac Corporation, has revamped the 20-year-old formula it uses to determine a consumer’s FICO score — the credit score most lenders use to determine who can qualify for a loan or new line of credit. (more…)

Popularity: 6% [?]

In an attempt to increase the availability of credit for homebuying and to reduce borrowing costs, the Federal Reserve has begun buying troubled mortgage-backed securities as part of an initiative the central bank originally announced in November (more…)

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We’re learning the hard way to reign in our spending and reduce our debt, and we’re not always responding well, says Gaetano Vaccaro, deputy clinical director of Moonview Sanctuary, a treatment center for emotional and behavioral disorders (more…)

Popularity: 10% [?]

The New York Metropolitan area is leading the nation in bankruptcy filings, outpacing the national average of 34 percent (more…)

Popularity: 6% [?]