Econ Exam (Module 2)
Which Michigan governor signed the Michigan identity theft act?
Jennifer M. Granholm
What types of loans/accounts will not help a consumer establish credit?
-rent -cellphone payments -insurance -savings account *unless they go into a collection court, these don't show up on the credit report but they don't directly go on it
Describe the new system used by the credit reporting agencies for handling medical debt on credit reports. Will a medical collection account be removed from a credit report once it is paid off? Will a paid medical collection continue to hurt a consumer's credit score? Explain.
"Medical bills used to be treated the same way as any other unsecured debt, like credit cards. You were late, it got reported to credit agencies and showed up on your credit report," says Bev O'Shea, a consumer credit expert at NerdWallet. "Today, the law gives people with medical bills a lot more time to look over bills, negotiate with health-care providers, see what insurers will pay, or set up a payment program. It's simply much more fair and friendly for consumers." Last year, the three major credit bureaus-Experian, Equifax and TransUnion-also instituted a change that requires a 180-day waiting period before medical debt gets added to consumer credit reports. This is an important change, because medical billing companies have a habit of just sending bills directly to collections, sometimes even before consumers have a chance to review them. With the new rules, you'll have about six months to make payments or make arrangements with your insurance carrier. They disappear when paid in full
What are "public records" and why do they appear on credit reports? How long do each of the following appear on credit reports? Unpaid tax liens, unpaid court judgments, paid tax liens, paid court judgments.
"Public records" refer to county, state or federal materials that are typically viewable by the public. Examples of public record information that are often included on credit reports are bankruptcies, civil judgments, tax liens, foreclosures and wage garnishments. Unpaid tax liens -15 years from filing date paid tax liens-7 years from paid date unpaid court judgments and paid court judgments- In most cases, removing a civil judgment from your credit report is not a possibility. Most judgments will remain on your credit report for seven years from the filing date, and this timeframe will apply whether you pay off your damages or not. Paying off a civil judgment on time will likely still be beneficial to your credit health, though. If you do so, the status of the judgment on your credit report could be updated to reflect that it's been satisfied. If you leave a judgment unpaid, though, it could potentially be refiled toward the end of the seven-year limit, renewing the negative mark for another seven years.
What are the different ways identity can be stolen? Describe each.
-You can be mugged -You can lose your wallet or social security number -They can see/find/get your social security number -Throwing out mail with bank accounts, other document
The book lists several ways for the consumer to boost his/her credit scores. Describe each of those strategies, explaining how those behaviors can help raise credit scores.
-can't raise scores if your finances are in free fall -can't raise scores if you don't use credit -you don't have to pay interest to have great scores -you don't have to expect overall results -patrol your credit reports -get one or two or three major credit cards -get an installment loan (student, personal, home, auto, mortgage) -arrange automatic payments for cards -don't let disputes go to collection -pay down and spread debt -understand ballences -don't let cards go unused -push against lower limits -apply for cards sparingly -take money from others and owe them to pay off credit card debt
Describe steps a consumer can take to establish credit.
-federal student loans -get a secured credit card -show a banker your electric bill, proof of rent payments, prove that you have money in savings and that can help you get started opening a card and establishing credit -take money from your tax refund towards a secured credit card to get you started (like a rent deposit you get at the end, starts your credit if you use it for like 20 bucks and pay every month)
Tests to be considered for bankruptcy
1. They have to seek credit counseling to help people manage credit and debt to benefit the consumer 2. A needs test is required to separate people who have no way of paying off debt and people who do. How did they get the debt, as well? Was it medical bills or leasing a jaguar (that's considered).
What are the two major purposes of the Federal Trade Commission? Explain how each helps consumers.
1. To maintain competition and guard against monopolies 2. To protect and educate consumers
How many citizens are affected by identity theft each year?
10 million people
How long will a Chapter 7 bankruptcy remain on a credit report?
10 years
How many individual laws made up Michigan's Identity Theft Act?
11
What percentage of consumer complaints were related to identity theft? What were the three most common types of identity theft in 2015? What was the percentage of each type?
16% were identity theft Wire transfer- 61% Credit cards- 14% Bank account debit- 8%
What age range/ranges of citizens had the smallest percentage of identity theft complaints in 2015?
19 and under with 5% and 70 and over with 16%
According to the FTC, what percentage of consumers have a mistake on their credit reports?
20%
Approximately how many Americans are in the CRAs' databases?
200 million
Using MyFico.com as your source, describe each factor that determines a consumer's credit score. Approximately how much weight does each factor have in determining a credit score? Explain why each factor is important.
35% payment history- The first thing any lender wants to know is whether you've paid past credit accounts on time. This is one of the most important factors in a FICO® Score. 30% amount owed- Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO® Score. 15% length of credit history- n general, a longer credit history will increase your FICO® Scores. However, even people who haven't been using credit long may have high FICO Scores, depending on how the rest of the credit report looks. 10% new credit- Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history 10% credit mix- FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans
According to the Consumer Financial Protection Bureau, how many Americans have medical debt on their credit reports?
43 million Americans have overdue medical debt on their credit reports
What dollar amount of losses have victims of identity theft suffered?
5 billion dollars
What dollar amount of losses have businesses incurred due to identity theft?
50 billion dollars
In studying identity theft, the Michigan Legislature found the number of hours it took the average victim to clear his/her name. What was that number?
600
What percentage of identity theft victims notified a police department and filed a police report in 2015?
89%
What is a "carder forum"?
A carder forum is an underground marketplace where credit and debit card information is sold. Identity theft expert Neal O'Farrell says they "are the Craig's List of the hacker underground."
What is a Chapter 7 bankruptcy? What is this type of bankruptcy sometimes called? What happens to a consumer's debt after a Chapter 7 bankruptcy?
A chapter seven bankruptcy is a personal bankruptcy where most debt is discharged/ eliminated (aside from debt ruled in another court) and they
What is a collection account, sometimes called a profit/loss account or a write-off? Does this mean the consumer no longer owes this debt? Explain.
A collection account is a loan that has been turned over to a third-party debt collection agency due to negligent payment practices of the borrower. The collection agency assumes the responsibility of collecting the debt for the original creditor. They still owe it
What is the value of a low limit credit card on the Dark Web? ....a high credit limit credit card?
A low limit might sell for $1 or $2, while high limit cards, such as an American Express Platinum card, can sell for $15 or considerably more.
What is a Chapter 13 bankruptcy? How is this different from a Chapter 7?
A personal bankruptcy when the needs based test says no to the chapter seven bankruptcy (also called a wage earner's bankruptcy. Instead of credit counseling, the bankruptcy court is the go between and doesn't wipe out debt, it just reorganizes it. Most people have to pay debt back in full or mostly. Stays on credit for about seven years because it's not as severe and they pay at least the bulk of the debt off.
What document does a consumer need to have if he/she has paid a court judgment? How should a paid court judgment read correctly on a credit report? Explain why the judgment reading "paid" or "paid-in-full" is not sufficient.
A satisfaction which is basically saying "paid in full as of January of 2008" or whatever date and goes away after seven years
What age range has the highest percentage of ID theft complaints across adults from age 20 to age 60? What could explain this?
Ages 50-59 This could be explained by the fact that this is the age most people hit their peak savings for retirement and start getting pensions, etc. and people might want to steal that
What level of court handles a personal bankruptcy?
All bankruptcy cases are handled in federal courts
What website did the FACT Act create? Why is website preferred over other "free credit report" websites? Explain.
Annual credit report.com The Federal Trade Commission which doesn't sell your info from a random, private organization but also doesn't just give you a number but all of your information.
When did bankruptcies start? Is it unique to the U.S.?
Bankruptcy dates back to Ancient Rome and the way are system is set up, we mimic King Henry VIII's English system. The Js constitution article one also establishes bankruptcy.
When did Congress make filing a Chapter 7 bankruptcy more difficult? What changes were made at that time? What must the consumer do before a bankruptcy court will consider a Chapter 7?
Bankruptcy was changed by congress in April of 2005. It was originally intended for unusual circumstances and congress changed it so it wasn't easy for people to just walk away from credit card debt and the bank would have to take the loss. Now There are two tests to be considered bankruptcy: 1. They have to seek credit counseling to help people manage credit and debt to benefit the consumer 2. A needs test is required to separate people who have no way of paying off debt and people who do. How did they get the debt, as well? Was it medical bills or leasing a jaguar (that's considered).
How do CRAs report late pays?
Barely late (>30 days) isn't counted, can last up to seven years. It gets better over time after you pay it off. It will say 30,60,90,120 or delinquent
Why would bankruptcy courts try to steer a consumer away from a Chapter 7 filing, and into a Chapter 13 filing?
Because they are above the poverty line to be able to pay off the debt
How can a consumer receive a copy of his/her credit report free every twelve months without charge?
By requesting one from the three main bureaus and they are required to give you one
What steps should you take if you become a victim of identity theft?
Contact one of the three major credit bureaus and have them put a fraud alert on your file of your credit card report, contact each of the creditors or institutions where your information was misused, follow up in writing, dispute the accounts, get a letter from them resolving these disputed fraudulent accounts, file a police report at your local station and get a copy of the report, contact and report it to the FTC
What can a consumer do with negative, but accurate, lines of credit? What steps should a consumer take?
Contact the creditor. If you go to them, they will have more options than if you don't and may allow you to settle the account or make a payment plan if you know you owe them. They might take mercy on you.
What countries seem to be home for these hackers?
Eastern Europe and Russia
Which is the oldest CRA?
Equifax
Name the three credit reporting agencies (CRAs, also called credit bureaus).
Equifax, Experian and TransUnion
When was each CRA founded?
Equifax- 1899 Experian- 1980(uk) and 1996(us) TransUnion- 1968
Each CRA has a method of scoring. List each CRA and the name of its scoring model.
Equifax- 280-850 Experian- 360-840 TransUnion- 300-850 (transrisk)
Where is each CRA's corporate headquarters?
Equifax- Atlanta Experian- Dublin TransUnion- Chicago
Which is the largest CRA?
Experian
What is the "Dark Web" and why is it difficult for law enforcement to police it?
Hackers hide these card forums on the dark web, where the location of the computer servers hosting the websites are concealed by using The Onion Router, also known as TOR. This randomly routes computer messages through several places on the Internet, wrapped in encrypted code, thus ensures secrecy. This prevents any single point from linking the source to the destination, making the sites almost impossible to trace by law enforcement.
Hard inquiry and soft inquiry
Hard inquiry is new credit and anytime someone sees the extreme level of credit and they need either verbal or written permission Soft inquiry is used when companies sell your information to other companies and you can opt out of this
How is credit scoring used in other ways? How can good credit help the consumer apart from getting lower rates on credit cards or on loans? Explain.
Help get a job if you're working with money, insurance companies evaluate applicants and decide premiums, utilities to determine if and how much to charge you for a deposit, landlords choosing a tenant
What payments and debts are exempt from bankruptcy filings?
IRS or state tax leans or taxes owed to cities or counties, alimony/ child support, federal student loans (unless there is an extraordinary case), basically something court ordered by a different court are still required
In 2015, where did Michigan rank (in the 50 states) for the rate of new cases of identity theft (per 100,000 population)? Where did Michigan rank (in the 50 states) in terms of population? What does this comparison imply?
Identity theft complaints- #6 out of 50 We ranked #3 in complaints in population which means there's more per 100,000 people than almost any state
Why/how can collection accounts stay on a credit report for more than seven years? Explain how/when this can happen.
If it's not paid
Describe the process consumers should follow to dispute errors on their credit reports.
If there are mistakes on credit reports, there is now a complaint/ dispute system online where you can dispute that you did not make charges, etc. Remember, you have three credit reports from these agencies and specify if the mistake is in one or all and give them information to prove that whatever mistake wasn't true
What procedure is followed by a CRA when it receives a consumer's dispute? How long does this process take?
If there are mistakes on credit reports, there is now a complaint/ dispute system online where you can dispute that you did not make charges, etc. Remember, you have three credit reports from these agencies and specify if the mistake is in one or all and give them information to prove that whatever mistake wasn't true and it should only take about a week. You can still send a hard copy or call as well, mail could take thirty days. They will either remove it, or say that something is still in your database and contact mentioned creditor, or saying this is actually yours.
What is the significance of a bankruptcy "discharge"? When does a consumer receive this? What does this discharge mean?
It is a permanent order that releases the debtor from personal liability for certain specified types of debts, thereby releasing the debtor from any legal obligation to pay any discharged debts
How long does it typically take a company to detect a breach of its system, according to this article?
It tends to take a company an average of five months to detect a breach from the infiltration.
When did the Consumer Financial Protection Bureau begin operation?
July 21, 2011
When did the Michigan Identity Theft Act take effect?
March 1, 2005
Should a consumer open lines of credit using different variations of his/her name? Why or why not?
No, it can be flagged and not go through and won't be on your credit but a random one or someone else's. this can really mess up credit or make things complicated
Is it smart to carry your Social Security card with you on a daily basis? Why or why not? What are the times it makes sense to carry this card with you?
No. This number should only be in your head and personal files. You can give it to employers, banks when opening new accounts and stuff,
How can identity theft be hidden from the victim?
People can start new stuff on you that you won't be able to find out about unless you check your annual credit reports
What is a personal bankruptcy?
Personal bankruptcy refers to a bankruptcy that is filed by an individual where majority of debts are non-business. Personal bankruptcy can be filed under Chapter 7 and Chapter 13 of the Bankruptcy Code. Chapter 7 bankruptcy involves liquidating the individual's assets and turning them over to the courts.
What is a "pretexting" or "phishing" scam? Who actually gives out personal information in this type of scam?
Phishing scams are attempts by scammers to trick you into giving out personal information such as your bank account numbers, passwords and credit card numbers.
Are the three CRAs part of the U.S. federal government, or are they private businesses?
Private businesses
What is the fastest type of identity theft involving government documents or benefits? Why is this happening?
Tax or wage related fraud
What power does the CFPB have over the three CRAs? Why is this significant?
The CFPB's approach to supervising credit reporting will be just like its approach to supervising banks and other nonbanks already subject to CFPB supervision. The companies will be subject to review of compliance systems and procedures, on-site examinations, discussions with relevant personnel, and they will be required to produce relevant reports. The rule outlining the CFPB's supervision of this market will be effective Sept. 30, 2012. The CFPB will begin its first exams thereafter. Before it begins exams, the CFPB will publish exam procedures that will provide guidance on how it will be conducting its monitoring. The CFPB has issued similar procedures for other companies that it is currently supervising, including mortgage originators, mortgage servicers, and payday lenders. Essentially, they oversee them and because this effects all consumers, its significant.
What is the Consumer Sentinel Network, and who subscribes to this network? How does this system help investigate consumer complaints?
The Consumer Sentinel Network (CSN) is a secure online database of millions of consumer complaints available only to law enforcement.
What is the FACT Act? What did this law do, and when was it passed by Congress?
The Fair and Accurate Credit Transactions Act, was signed into law in 2003. It is a revision of the Fair Credit Reporting Act. Basically. It allows consumers to get one free credit report from each of the three national credit bureaus every 12 months
What law created the FTC, and when was this law passed by Congress?
The Federal Trade Commission Act of 1914 in September
Will a non-medical collection account be removed from a credit report once it is paid off? Explain the length of time a non-medical collection account can remain on a credit report.
The minute you pay it off, a paid or settled collection will hurt less than one that's going on and on and on because two years after settles, it won't hurt as badly.
What are the three possible outcomes that could result after a consumer has filed a dispute over an error on a credit report? Describe each.
They will either remove it, or say that something is still in your database and contact mentioned creditor, or saying this is actually yours.
What is the primary business purpose of the CRAs? Is a CRA in business to help the consumer, or to help businesses? Explain.
To ensure creditors have the information they need to make decisions. They collect info on consumers to help aid businesses
How do hackers verify that the stolen cards work? Why do they use this method?
To ensure the cards work, the thieves use an automated system to charge a small amount to 10,000 cards at a time. This is around the price of a cup of coffee. They use this method because it can determine the card's validity and credit limit.
What should you have with you when traveling? Why would this be important?
When traveling, you should have copies of your passport and license/ ID because if yours get stolen, you may need to be able to identify yourself to get back home and even do simple things.
Why might a creditor offer to "settle" a delinquent account for less than the balance owed? Is this common? When, and why would a creditor offer this?
When you contact them, there is a good chance they will. This helps them get things taken care of and you usually have more options when you go to them. Also, if you explain and they don't have to chase after you, it is easier for both of you so they might offer to settle or a payment plan.
Can a consumer pay a bill late without it showing on his/her credit report? Explain.
Yes things that don't go on a credit report like rent or a cell phone bill that don't go on your report won't show on a credit report
Can a consumer ask to have a debt excluded from bankruptcy? What is this called?
Yes. It is called secured debt. For example, you may want to exclude your vehicle loan, or your home mortgage, or any other secured debt from bankruptcy because you want to keep your vehicle, home or other collateral. You ARE allowed, in effect, to exclude these kinds of creditors from the discharge (legal write-off) of your debts. You do have to inform such creditors about your case by including them on the creditor schedules, but they are immediately informed of your intention to exclude them from the discharge. They will be happy to keep accepting your money, and you will be able to keep the collateral. A similar situation applies to debts that you are legally obligated to pay in spite of filing bankruptcy, like recent income taxes, and child or spousal support. You are obligated to include them on your schedules and thereby give them notice of your case. (The IRS and your state taxing agency may get notice of every bankruptcy case anyway.) But such creditors will know that your debt is legally excluded from the discharge, and generally know that they are listed because they must be.
How many credit scores does each consumer have? Generally, which is a better score---a low score, or a high score?
You have three, one from each credit bureau The higher the better (300-850)
Are there other circumstances when a consumer can receive a free credit report? Explain each.
if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the credit reporting company. if you're unemployed and plan to look for a job within 60 days if you're on welfare if your report is inaccurate because of fraud, including identity theft
What is a "line of credit"? Typically, how long will a line of credit remain on a credit report? Explain how this timetable works.
line of credit- an amount of credit extended to a borrower. Think of it like a credit card, as long as your paying it, it's a good thing. If not, it's bad
Approximately how many credit reports are generated by the CRAs each year?
more than 3 billion
When was the Dodd-Frank Act passed by Congress, and what were the purposes of this law?
passed by the Obama administration in 2010 as a response to the financial crisis of 2008. Because the Great Recession of the late 2000s was due in part to low regulation and high reliance on large banks, one of the main goals of the Dodd-Frank Act was to subject banks to more stringent regulation. The Act created the Financial Stability Oversight Council (FSOC) to address persistent issues affecting the financial industry and prevent another recession. By keeping the banking system under a closer watch, the Act seeks to eliminate the need for future taxpayer-funded bailouts. To both ensure cooperation by financial insiders and fight corruption in the financial industry, the Dodd-Frank Act contains a whistleblowing provision to encourage those with original information about security violations to report them to the government. Whistleblowers receive a financial reward.
How many years must pass before a consumer can file another Chapter 7 bankruptcy?
you must wait at least 8 years from the filing date of the first claim in order to receive another Chapter 7 discharge
List the 10 specific things that the Michigan identity theft act did to protect Michigan citizens. How would each guard against identity theft and help protect Michigan consumers?
• create the Identity Theft Act to make it a felony in Michigan to use personal identifying information to obtain goods and services without consent • prohibit businesses from denying credit or public utility service to victims of identity theft and establish penalties for violations • clarify the jurisdiction where identity theft could be prosecuted • extend the statute of limitations for identity theft to six years after the crime was committed or the identity of the thief was established • create the Social Security Number Privacy Act to prohibit certain uses of social security numbers, establish penalties for violations, and provide remedies • establish the right of a victim of identity theft to obtain a police report • list identity theft as an unlawful practice of trade or commerce • prohibit the issuing of sales receipts that show more than the last four digits of a credit card account number • prohibit requiring a consumer to provide a social security number as a condition for doing business • prohibit, and create penalties for, photographing, recording, or electronically transmitting personal identifying information taken, without consent, from credit, debit, and ATM cards.
