Effective January 1, the Maryland Court of Appeals has instituted new rules that will require debt buyers to have more proof before they can obtain affidavit judgments in debt collection cases.  This is good news for debtors.

Debt buying companies focus on buying debts from credit card companies and other creditors that are past due.  They buy the past due debt for a fraction of the amount owed.  Frequently, the only proof the debt buyer has regarding the debt is the debtor’s name, address and social security number.

Since debtors often don’t appear in court on debt buyer/debt collection cases, debt buyers bank on obtaining monetary judgments by default.  However, the debt buyer frequently does not have sufficient reliable documentation showing ownership and the details of the debt (principal, interest, etc.). 

Now, debt buying companies will have to have additional information when filing these types of cases.  Better proof of the debt and interest is now required in addition to proof of ownership by the debt buyer.

A win for Maryland consumers!

The Chief Judge of the District Court of Maryland dismissed over 10,000 debt collection cases against Maryland residents. The mass dismissals are required by the terms of a settlement of a class action lawsuit against Midland Funding in federal court.

The dismissals include cases against Maryland residents who have been sued in District Court between Jan. 15, 2007 and Jan. 15, 2010 by Midland Funding to collect debts. The cases are being dismissed because Midland Funding was not licensed as a debt collection agency in Maryland at the time.

Debtors whose cases have been dismissed will receive written notification from the District Court of Maryland.

Great article on CreditCards.com regarding the tax implications of settling your past due debts.  Here’s a snippet of the article:

If you thought your money woes ended last year when you settled that credit card debt, think again.

For many consumers with debt problems, after the debt collector leaves their lives, the taxman arrives.

Months after successfully resolving credit card debts, consumers have received 1099-C  “cancellation of debt” tax notices in the mail. Why? The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that “income” on their federal income tax returns.

The problem: Many consumers have no clue what the 1099-C forms are, and some may be trashing the cancellation of debt notices because the forms are sent by creditors or debt collectors with whom they thought they no longer had business. Still others are not filing the 1099-Cs with their federal income tax returns — putting taxpayers at risk for IRS audits, penalties and fines. Consumer credit counselors and tax attorneys say few consumers are aware of the tax implications of settling to pay a lesser amount than they owe in credit card debt.

Consumers who receive the 1099-C cancellation of debt forms should immediately take them to a tax preparer or tax adviser, experts say.

Read more of the article on CreditCards.com.

The U.S. banking industry’s reliance on magnetic stripe credit and debit cards threatens to turn the country into a magnet for more card-based fraud, said an executive with the Federal Reserve Bank of Atlanta.

Richard Oliver, executive vice president of the Atlanta Fed’s Retail Payments Risk forum, said that regulators’ reluctance to require more secure technology threatens to isolate the U.S. as a target for fraud rings and criminals thwarted by chip-embedded smart card technology available in Europe, Canada and other parts of the world.

“That means that criminals, intent on profiting from card fraud, will continue to migrate to the United States in growing numbers,” says Oliver, who is also responsible for managing the Fed’s global check and ACH businesses.

While banks are experimenting with chip-embedded technology, smartcard adoption is hindered by the reluctance of merchants to bear the cost of six million new payment terminals that would be required for conversion to the new standard.

U.S. citizens traveling abroad are already running into compatibility problems in using their magnetic stripe cards in countries where ATM machines and point-of-sale terminals have been adapted to read only chip-embedded cards.

Oliver proposes that the government initiate a public policy directive to begin the changeover to the new standard in the U.S., much like the digital TV broadcast conversion completed in 2009.

“If we want to mitigate the possibility of the United States being a center of card fraud and enable our consumers and business folks to travel abroad more easily,” says Oliver, “it may be time to charge someone in government with developing a well-thought-out, participatory, multi-year plan to move this country to the emerging global payments card standard.”

FICO reports that a credit gap for consumers will grow as lenders expect credit availability to fall short of consumer demand through the end of 2010.

The quarterly survey of bank risk professionals found that 73% of respondents expect the volume of credit applications to increase or remain steady over the next six months. However, 46% of respondents expect approval criteria for credit to get stricter. Furthermore, 38% of bankers surveyed expect the approval rate for credit applications to decline.

“Although the outlook isn’t as pessimistic as it was earlier this year, it’s clear we still haven’t reached a point of equilibrium between supply and demand for consumer credit,” says Dr. Andrew Jennings, chief research officer at FICO. “Banks remain concerned about loss prevention. Government data released in August indicates personal bankruptcies are at their highest levels in five years, and other recent data confirms the ongoing challenges in the employment and housing sectors. This type of economic environment makes it difficult for lenders to open up the flow of credit without taking on significant risk.”

Delinquency Report

When asked about expected delinquency rates for credit products, many bankers said they expected delinquencies to increase. This includes home mortgages (53% of respondents expected a rise in delinquencies), credit cards (42% expected an increase), small business loans (47% expected an increase) and student loans (49% expected an increase).

In a somewhat unexpected survey result, according to FICO, bank risk officers who are responsible for auto loans and credit cards had a particularly negative outlook about their sectors. Among bankers who manage auto loans, 96% expect delinquencies on auto loans to increase or remain the same. And among bankers who manage credit cards, nearly 85% expect delinquencies on credit cards to increase or remain the same.

Respondents also were asked about their overall expectations for new delinquencies (i.e., accounts that become 30-days late) and chargeoffs (i.e., older delinquencies that are written off). Respondents felt both categories of delinquencies were going to rise, and the sentiment was similar in strength for both categories, which suggests the pipeline of delinquencies isn’t going to shrink in the near future.

A federal judge has put a stop to three companies’ allegedly deceptive telemarketing calls, including robocalls, that promised to reduce consumers’ credit card interest rates.

According to the FTC, over the past two years, the companies made calls to consumers claiming that they could negotiate with credit card issuers to substantially lower the interest rates on the consumers’ credit cards. They also allegedly delivered prerecorded “robocalls” that consisted of urgent-sounding messages from “Card Services” or “Financial Services,” stating that consumers needed to “press one” to speak to a representative about their credit card interest rates. Many consumers believed the calls were from their credit card companies.

Consumers who signed up for the services were charged from $499 to $1,590 up-front and promised their money back if the companies failed to deliver at least $2,500 in interest rate savings. Instead of arranging reduced interest rates, the companies sent consumers instructions to pay down their credit card debts early, thus saving money on interest. Consumers who complained and demanded refunds allegedly were denied or had a $199 “nonrefundable fee” deducted from their refund.

The FTC alleged that AMS, Rapid Reduction, PDMI, and their owners violated the FTC Act and the Do Not Call and other provisions of the Telemarketing Sales Rule by (1) deceptively promising consumers they could reduce their credit card interest rates; (2) misleading consumers about their refund policies; (3) illegally calling numbers on the National Do Not Call Registry; (4) failing to honor consumers’ requests not to be called again; and (5) making pre-recorded telemarketing calls to consumers without their express written consent. Nearly all such calls have been illegal since September 1, 2009.

U.S. District Judge Lonny Suko has issued an order appointing two receivers to take over the businesses and freezing the assets of Advanced Management Services NW LLC, doing business as AMS Financial, Rapid Reduction System LLC, and PDM International, Inc., doing business as Priority Direct Marketing International, Inc. (PDMI).

Bank of America had the highest reported rate of credit card delinquencies and charged-off the greatest percentage of its credit card loans in April, according to SEC filings by six major consumer credit card issuers.

Bank of America had the highest rate of total delinquencies at 6.73 percent of all credit card accounts. Bank of America also reported the highest net charge offs in April with 12.71 percent of card accounts charged off.

The FBI arrested eight men and charged them with fraudulently using consumer credit cards to buy as much as a million dollars in merchandise from stores in Northeast Ohio – including Home Depot, Staples, Best Buy, Lowe’s, Macy’s, Nordstrom, Saks Fifth Avenue and Sears.

In the scheme, an inmate at a federal prison in Fort Dix, N.J. used a cell phone to access and alter existing credit card accounts. He added new users to other accounts, then those new users would make big-ticket purchases at the stores.

The inmate was persistent in calling customer service until he was successful in gaining access to someone else’s account. He then would modify the account and make one of new users – men in the Cleveland area – authorized users. At times he would use public information, along with guesswork, to gain access to the credit card accounts.

A large amount of property purchased under the scheme was seized from a house in Cleveland. There was so much stored there that several trucks were needed to haul it away. Two men in that home were arrested. One was “in arm’s length of a handgun,” and the other was “sleeping with a shotgun.”

All the men arrested are charged with conspiracy to commit wire fraud.

Many credit cardholders in Maryland as well as across the United States have been having their Citi and Shell credit cards canceled without any notification from the card issuer. Many customers are becoming irate when they go to use their card for emergencies, but were denied because their accounts have already been closed.

Many credit card companies have practiced the act of closing accounts or lowering credit limits. Credit card issuers fear that cardholders may charge up their card balances if notified in advance of account closures, leaving the card issuer with a large unpaid balance. As of now, card issuers are only required to give notice that a cardholder’s account has been canceled within 30 days of the account being closed.

Citi, for reasons not explained, has chosen to close a limited number of gasoline card accounts that display the Mastercard logo. Another reason that for card issuers cancel accounts without notice is because of inactivity on the accounts.

Unfortunately, many consumers found that their credit card was no longer active when they were trying to purchase gas that was desperately needed. Many of the cardholders are feeling betrayed and confused on why their account was deactivated because they possessed timely payments and high credit scores.

American Express account holders are finding themselves scrutinized and their accounts being altered. American Express is using factors such as where you live, who holds your mortgage, and where you shop to determine your worthiness with them. American Express cardholders are finding their credit card limits decreased and even their accounts closed.

American Express is using a method that determines which of their account holders will have their accounts changed. American Express has stated that an account holders payment history, income, and their credit bureau history are the determining factors. Other factors are also being looked at by American Express because of the state of the economy. Cardholders who obtain subprime mortgages and those who live in areas where there is a deterioration in home values are finding they are hit hard by American Express and their credit worthiness analysis.

Another example of American Express’ cutting methods includes where you shop. Shopping at businesses such as rent to own stores can determine if your account stays open.

In the past, 80% of American Express cardholders have seen credit increases and 20% were effected by cuts.. Because of the struggling economy, the ratio is now 50-50.