The Advantage Advisor

Volume 4 / Issue 7/ 2009
This Issue:
Save money grocery shopping
The new credit card reforms
Facts about credit card debt

If you have received an Act 91 notice …

An Act 91 notice is a notice that a homeowner receives if he or she has defaulted on a mortgage in Pennsylvania.

Under the conditions of an Act 91 notice, the borrower has 33 days from the date the notice was issued to schedule a foreclosure prevention session with a certified housing counseling agency, such as Advantage CCS. This foreclosure prevention session will legally put a temporary stop to the foreclosure process, but the session must be scheduled within the 33 day time frame. If the 33 day time frame has elapsed, you are still eligible for assistance and can schedule a counseling session, but the foreclosure process will not stop.
The counselor will work with you to determine if you are eligible to receive assistance through the Homeowner’s Emergency Mortgage Assistance Program (HEMAP).

HEMAP is a loan program designed to protect Pennsylvanians who, through no fault of their own, are financially unable to make their mortgage payments and are in danger of losing their home to foreclosure.

Some homeowners who are facing foreclosure choose to contact their lender directly in an attempt to workout a plan to modify their mortgage and keep their homes.

It is crucial that if you have received an Act 91 notice you contact Advantage immediately, regardless of whether or not you are currently working directly with your lender. Working with your lender will not legally stop the foreclosure proceedings.

Scheduling a housing counseling session with Advantage will not prohibit you from continuing to work directly with your lender or slow down that process, and it may give you an additional option to avoid a foreclosure. Your counselor can also contact your lender as part of the counseling process.

To schedule a foreclosure prevention (Act 91) session, call (888) 511-2227.

Dear Debt Monkey

Q: I recently received an offer in the mail to provide me with federal help to pay off my credit card debt. It looks like the envelope was sent by the government. What can you tell me about this program?

A: There is no federal program to help individuals eliminate credit card debt at this time. The government did not send the offer.

It’s likely the offer was sent by a private, for-profit debt relief company that is attempting to solicit business from consumers by giving the false impression that the company is somehow government-affiliated.

A reputable debt relief agency will never solicit your business, especially if you did not initiate contact. Be very cautious of any company that calls, mails or e-mails a debt relief offer to you out of the blue.

Whenever you consider working with a debt relief company, make sure to understand exactly what the company is and what they are offering.

Look for a non-profit company that will have your best interests at heart. Get details of any debt relief plan in writing before you sign up for anything. Research the company with the Better Business Bureau and your state Attorney General. Finally, make certain the business follows any applicable federal and state laws and has a current license if your state requires debt relief companies to be licensed.

Credit card reform enacted

After months of debate, credit card companies will soon be forced to enact new regulations designed to protect consumers. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 has been signed into law by the president and will go into effect February 2010.

The bill provides sweeping changes to the way credit card companies operate. Under the bill:

• Universal default (which allowed a credit card company to raise your interest rate based on your payments to other creditors) and double cycle billing (where interest is charged on a balance you paid off last month) are both banned.
• Over limit fees are prohibited unless you have authorized transactions to go through rather than have your card declined.
• Late fees, over limit charges and penalties must be reasonable.
• Credit cards cannot be issued to someone under 21 unless they have an adult co-signer or can prove they can repay the debts. Credit card companies and universities must also disclose contracts to market cards to students.
• Card issuers must disclose how long it will take to pay off the credit card balance if you only pay the minimum payment each month.
• Companies cannot raise interest rates on existing balances unless you are at least 60 days late paying a bill. If you pay at least the minimum payment on time for six months, then the interest rate must be restored to the original rate.On cards with more than one interest rate, the payment first has to be applied to the balance with the highest rates.Companies must give you 45 days notice before raising your interest rate.
• Companies must send bills 21 days before the due date.

The legislation also changes the way credit card companies handle gift cards. Gift cards must now have a mandatory shelf life of five years and inactivity fees are banned unless there’s been no activity on the card for 12 months.

Credit card companies will also have to change the way the disclosures are written. The legislation requires all disclosures to be written in plain language and all fees must be highlighted. Credit card statements must also include the monthly and the year to date amounts paid in fees. The reason for the fees also has to be listed. Companies not only have to outline how long it will take the consumer to pay off the card balance if only paying the minimum payment, they must also show how much the consumer must pay each month to have the balance paid off in 36 months. The statement also has to show the total amount the consumer will pay in interest.

Contract terms must be clear and remain the same during the first year of service.

Experts predict the credit card reform legislation will change how consumers and credit card companies operate. As a result of the legislation, companies will likely impose more annual fees and cutback on reward programs. Fees for balance transfers, and cash advances will likely increase as well.

The legislation does not cap interest rates, which some industry analysts see as a weakness to the bill. Analysts predict credit card companies will increase interest rates to account for what companies perceive as their inability to determine cardholder risk under the new regulations.

The Credit Card Accountability, Responsibility, and Disclosure Act also includes stiff penalties for companies that violate it. Companies face fines of $5,000 per violation of the act.

Tips

It’s easy to overspend at the grocery store. Common shopping habits cause many people to go above what they intended to spend. Here are a few tips to keep you on task and within budget when food shopping:

• Make a list before you head to the store. You’ll be less likely to buy what you don’t need.
• Plan meals for the week before you shop. Check out your grocery store’s flier and plan out meals based on what is on sale that week. Also, try to buy fruits and veggies that are in season, because they’re less expensive.
• Don’t dawdle in the grocery store aisles. A recent study showed that shoppers who spent more time looking around in the store also spent more money because they strayed from their list. Stick to your list. Get in and get out.

Advantage Fact Box

In the past 10 years, U.S. credit card debt has increased 25 percent. It reached $963 billion in January.

The average outstanding credit card debt for households that have a card was $10,679 at the end of 2008.

More people are using the “pay as you go” method instead of charging purchases. According to an April 29 report from Visa, the total dollar amount of purchases made with Visa debit cards at the end of 2008 was larger than the amount spent on credit card purchases. It is the first time debit purchases have exceeded credit purchases. MasterCard also saw a 13 percent increase in debit card transactions and a drop in credit card purchases of more than 2 percent.

Source: www.creditcards.com

Resources

Pennsylvania Housing Finance Agency:
www.phfa.org

HEMAP Hotline:
(800) 342-2397

Better Business Bureau:
www.bbb.org or (703) 276-0100

<- Back to newsletters