Friday, March 28, 2014

Zombie Debt

Even Zombies say, "Zombie debt bad!"

Zombies are more popular now than at any time I can remember. There are new zombie movies coming out, zombie games, zombie parties, and even self-defense products for the upcoming zombie apocalypse.  There is one more Zombie Threat you must protect yourself from, ZOMBIE DEBT!

Zombie Debt is a collection that has been “termed” off your report. In other words, it has reached its seven year expiration and been removed automatically from your credit report. Then collectors try to call and collect on “Dead Debts” or “Zombie Debts.” It is as if the seven plus year old debt has risen from the grave and come back to haunt us. Imagine your old debts doing the slow zombie shuffle to your door yelling, “Pay me, pay me!”

Zombie Debt Collecting is becoming more common. This is particularly true with people who don’t track their finances well and don’t follow their credit report. Bill collectors are taking advantage of their naiveté and making threats about legal actions if payments don’t start right away. These tactics are working in the lower income communities. Typically they are going after old credit card debt.

Consumers need to know their rights in regards to credit reporting. I present a workshop in the community and at my credit union titled, “The Myths of Credit.” The presentation goes over the top ten myths of credit and an emphasis is put on managing and understanding collections. Too many people don’t understand that a collection can only be collectable for seven years and not beyond that. However, these collection agents continue to attempt to collect debts that are well beyond the seven year period. Also, once families go into an agreement with the collector on a Zombie debt, they need to stick to it and make their payments as the collection agent could now make this a new collection for nonpayment due to the payment agreement/promissory note the consumer might sign.

How should a person handle collection calls and avoid Zombie Collections? Regrettably, it is not as simple as shooting a zombie in the head and ending the threat.

Before a collector calls:

1.       Access your credit report through You can access all three bureaus’ reports here. You will never be in the dark about your credit status. You will always know when a collection has gone on to your report and when it expires. This is a free service.

2.       Sign up for They will notify you of any changes in your score and provide the info for those changes; such as a collector “re-aging” a collection or putting an old expired collection back on your report with a new date to make it appear current. This is also  a free service.

When a collector calls:   
  1. Don’t admit to anything. Don’t agree to payments. Your agreement to making payments  or even acknowledging the debt could provide the company the legal right to collect the debt and may reinstate a dead debt and make it a real Zombie!
  2.   Make them identify themselves and the details of the debt they are collecting; dollar amounts and the date the collection became active on your credit report (AKA First date of delinquency: The legal term for the first day a debt goes on your credit report). This date can clue you into whether they are collecting on a Zombie debt.
  3.  Don’t fall for the traps. Agencies will sometimes “re-age” the debt, (reporting the debt to the credit bureau as if it’s new). They might promise to wipe off the “red checkmark” on a credit report, of sometimes do a “bait and switch” where they tack on the balance of a zombie debt to a new credit card offer. 
  4.  Ask them to validate the date and amounts of the collection and send them to you in writing. This should also include asking them for the credit card agreement you signed. Double check the statute of limitations in your state. Generally, seven years is the accepted period of collection. If the debt was discharged thru a bankruptcy they cannot collect it.
  5.  If you have determined that you are not responsible for the debt due to age of the debt or other written agreements such as settled or paid in full, write a letter to the collection agency and inform them that you will not pay the debt and share the reason for it as well as any copies of evidence you have showing the debt is no longer collectible.
  6.  Collectors often like to threaten payees with court. “If you don’t pay this, we will take you to court!” With most modest credit card debts it is just not economically feasible to hire attorneys to go after the payees. This is a common threat with Zombie debt. If your debt is expired and the collector makes this threat, it is an empty threat with nothing to back it up. No one is going to spend big money ($500 per hour!) to hire an attorney and pay for court costs to collect small expired debts.  
  7.  Check your credit report annually. Review it and compare it to the previous year’s report and determine that all items on the report are current and valid.

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Save The Date!
Meriwest Spring Pre-Owned Car Sale
Sat-Sun: April 12th and 13th
Chesbro Financial Center, San Jose, CA
Sale Hours:
  • Saturday, April 12th:
    9:00 a.m. - 6:00 p.m.
  • Sunday, April 13th:
    10:00 a.m. - 5:00 p.m.
Event Location:
Take advantage of this special event!
  • Low auto loan rates
  • Huge selection of over 200 quality vehicles
  • Up to 100% financing available for qualified buyers*
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  • Trade-ins welcome
  • Plus PRIZES and more!

Friday, March 14, 2014

Debit Cards vs. the Fraud at Target Stores

With the recent electronic data theft from Target, Neiman Marcus, and others in the 4th quarter of 2013, many people are looking for an alternative to their bank or credit union issued debit card. We are getting a lot of questions like:

  •          How safe is my debit card?
  •          What happens if I find unauthorized electronic debits in my bank statement?  
  •          How do I get reimbursed for unauthorized usage of my card? How long does it take?

Bank customers and credit union members all over the country have concerns about the safety of their data. Let’s be clear here, your financial institution very likely has the best anti hacking software made today. There has not been a significant breach of banking data since 2011. How often are retail merchants the victim of identity theft hackers? It seems like every month we hear about a new breach! 

The problems really lie with the retailers like Target. Their security was so poor the thieves were able to use common malware that had been used before in other data breaches and the bad guys didn't even encrypt where the money was going! Essentially, Target was broken into by an amateurish gang who left all kinds of evidence of what was happening, but Target’s IT department failed to recognize the danger. (See the article in the Minneapolis Star Tribune  for a story on the methods of the thieves.) 

Target will not be paying for anyone’s monetary losses resulting from the fraud. They won’t be paying the millions of dollars it cost the financial institutions to replace all the compromised debit and credit cards. Retailers have no responsibility to their customers when there is a data breach. For many of you this is a very surprising revelation but that is how it works today. The financial institutions are forced to pay for their customer’s losses after a hacker has broken into the merchant’s computerized payment system. Target’s breach cost banks and credit unions $200 million so far! It cost credit unions in Wisconsin $750,000 alone. The numbers for California are still being calculated.

(Okay, I am done with my “I am so mad at Target’s weak data protection.” screed. Now, let’s talk about Debit Card security.)

The debit card is a viable alternative for paying in store charges as well as preauthorized transfers. When managed properly, it has very strong anti-fraud/anti-theft procedures. The Federal regulation known as Regulation E provides consumer protections for fraud against unauthorized use of a debit card. One has 60 days from the issuance of their account statement in which the problem or error occurred to contact their financial institution and file a Reg E complaint. This is true for banks and credit unions.

Once the complaint is filed it takes about 48 hours for most institutions to issue provisional credit to their clients for the disputed items. Each will have a different procedure so you should make yourself familiar with the procedure at your institution. The reimbursement is pending an investigation into the fraud. Most investigations are completed within 10 days resulting in final credit or revocation of credit. Reg E limits a consumer's liability for unauthorized electronic fund transfers, such as those arising from loss or theft of an access device, to $50; if the consumer fails to notify the depository institution in a timely fashion (>60 days after the statement was issued), the amount may be $500 or unlimited.

The key to this is that customers of banks and credit union members need to keep an eye on their accounts. It is so much easier today than 10 or 15 years ago as we now have online and mobile banking. Our customers and members can keep up on their accounts while on the run and be able to address any inconsistent transactions immediately with their institution. The faster someone reports an unauthorized transaction, the faster the institution can reimburse them.

One of the reasons credit cards are being pushed as a payment alternative is that the credit card companies are pushing this issue and have been for many years. My friends at Visa would want people to pay all their bills and groceries with a credit card and then write one check at the end of the month to pay all. According to the credit card companies this protects your checking account from being exposed to fraud. Of course, the credit card companies would be very pleased if you could only pay a portion of their bill. Then the consumer will be paying interest and that is the issuers’ primary desire!

For domestic payments, I would use my debit card and keep a close watch on my checking account thru my online banking program. I would definitely use a credit card when traveling internationally.

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Our Next Free Teen Financial Education Class:
Real World Budgeting for Teens and College Students
Saturday, March 22, 2014 - 10:00 -11:00 a.m.
Chesbro Financial Center, San Jose, CA

Attend this FREE, fun and interactive class made just for teens! Various life scenarios involving everyday finances are covered:
  • Learn how to make wise money decisions when starting an "adult life".
  • Learn tips and find out the steps on how to rent that first apartment.
  • Learn the best tricks for making ends meet when you are on your own.
  • Find the hidden costs of being on your own.
  • Learn how saving money can improve your lifestyle.
  • Learn how your down payment on your first car can effect your payment and interest rate.
Teens, learn what it's like to be on your own in the real world!

Parents are also welcome to attend.

RSVP today to Greg Meyer, Community Relations Manager - or call (408) 365-6328