The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.

Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.

Here are some questions and answers about your rights under the Act.

What types of debts are covered?

The Act covers personal, family, and household debts, including money you owe on a personal credit card account, an auto loan, a medical bill, and your mortgage. The FDCPA doesn’t cover debts you incurred to run a business.

Can a debt collector contact me any time or any place?

No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. And collectors may not contact you at work if they’re told (orally or in writing) that you’re not allowed to get calls there.

How can I stop a debt collector from contacting me?

If a collector contacts you about a debt, you may want to talk to them at least once to see if you can resolve the matter – even if you don’t think you owe the debt, can’t repay it immediately, or think that the collector is contacting you by mistake. If you decide after contacting the debt collector that you don’t want the collector to contact you again, tell the collector – in writing – to stop contacting you. Here’s how to do that:

Make a copy of your letter. Send the original by certified mail, and pay for a “return receipt” so you’ll be able to document what the collector received. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact or to let you know that they or the creditor intend to take a specific action, like filing a lawsuit. Sending such a letter to a debt collector you owe money to does not get rid of the debt, but it should stop the contact. The creditor or the debt collector still can sue you to collect the debt.

Can a debt collector contact anyone else about my debt?

If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you. If you don’t have an attorney, a collector may contact other people – but only to find out your address, your home phone number, and where you work. Collectors usually are prohibited from contacting third parties more than once. Other than to obtain this location information about you, a debt collector generally is not permitted to discuss your debt with anyone other than you, your spouse, or your attorney.

What does the debt collector have to tell me about the debt?

Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.

Can a debt collector keep contacting me if I don’t think I owe any money?

If you send the debt collector a letter stating that you don’t owe any or all of the money, or asking for verification of the debt, that collector must stop contacting you. You have to send that letter within 30 days after you receive the validation notice. But a collector can begin contacting you again if it sends you written verification of the debt, like a copy of a bill for the amount you owe.

What practices are off limits for debt collectors?

Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not:

• use threats of violence or harm;
• publish a list of names of people who refuse to pay their debts (but they can give this information to the credit reporting companies);
• use obscene or profane language; or
• repeatedly use the phone to annoy someone.

False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not:

• falsely claim that they are attorneys or government representatives;
• falsely claim that you have committed a crime;
• falsely represent that they operate or work for a credit reporting company;
• misrepresent the amount you owe;
• indicate that papers they send you are legal forms if they aren’t; or
• indicate that papers they send to you aren’t legal forms if they are.

Debt collectors also are prohibited from saying that:

• you will be arrested if you don’t pay your debt;
• they’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so; or
• legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action.

Debt collectors may not:

• give false credit information about you to anyone, including a credit reporting company;
• send you anything that looks like an official document from a court or government agency if it isn’t; or
• use a false company name.

Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not:

• try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt – or your state law – allows the charge;
• deposit a post-dated check early;
• take or threaten to take your property unless it can be done legally; or
• contact you by postcard.

Can I control which debts my payments apply to?

Yes. If a debt collector is trying to collect more than one debt from you, the collector must apply any payment you make to the debt you select. Equally important, a debt collector may not apply a payment to a debt you don’t think you owe.

Can a debt collector garnish my bank account or my wages?

If you don’t pay a debt, a creditor or its debt collector generally can sue you to collect. If they win, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the creditor or collector to get a garnishment order against you, directing a third party, like your bank, to turn over funds from your account to pay the debt.

Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Your wages usually can be garnished only as the result of a court order. Don’t ignore a lawsuit summons. If you do, you lose the opportunity to fight a wage garnishment.

Can federal benefits be garnished?

Many federal benefits are exempt from garnishment, including:

• Social Security Benefits
• Supplemental Security Income (SSI) Benefits
• Veterans’ Benefits
• Civil Service and Federal Retirement and Disability Benefits
• Service Members’ Pay
• Military Annuities and Survivors’ Benefits
• Student Assistance
• Railroad Retirement Benefits
• Merchant Seamen Wages
• Longshoremen’s and Harbor Workers’ Death and Disability Benefits
• Foreign Service Retirement and Disability Benefits
• Compensation for Injury, Death, or Detention of Employees of U.S. Contractors Outside the U.S.
• Federal Emergency Management Agency Federal Disaster Assistance

But federal benefits may be garnished under certain circumstances, including to pay delinquent taxes, alimony, child support, or student loans.

Do I have any recourse if I think a debt collector has violated the law?

You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can’t prove that you suffered actual damages. You also can be reimbursed for your attorney’s fees and court costs. A group of people also may sue a debt collector as part of a class action lawsuit and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever amount is lower. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it.

What should I do if a debt collector sues me?

If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

Where do I report a debt collector for an alleged violation?

Report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov). Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law.

For More Information

To learn more about debt collection and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government’s portal to financial education.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free,              

        1-877-FTC-HELP (             

        1-877-382-4357); TTY:               1-866-653-4261         1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

According to the Census Bureau, the number of Americans without health insurance rose to 46.3 million in 2009, that’s a lot of full-football stadiums worth of people without guaranteed medical coverage. 

Here are five alternatives to health insurance that won’t break the budget.

No.1: Sign Up for a Discount Health-Card Program

There are many non-insurance programs out there that allow consumers to pay a monthly membership fee to get access to a variety of health-care providers, according to Allen Erenbaum from the Council for the Consumer Health Alliance.

“A typical discount program would include a fee which can include coverage for just one person or a family and gives you access to discounted care, dental, drugs, hearing and sometimes even chiropractors,” he said.

Each plan differs on coverage, so if you routinely need to see a chiropractor or dentist, make sure to choose your program accordingly, Erenbaum suggests.

Check out the Consumer Health Alliance Web site for more information. The programs vary in price, with some costing as little as $5 month, according to Erenbaum.

No. 2: Call Your County and State

There are a lot of state programs for families and individuals who find themselves without insurance, according to Knott. Call your state and local health department or community health center.

“Florida recently started a program called ‘Cover Florida Health Care,’ which offers basic preventative and minimal care and has been significantly under-utilized due to lack of advertising,” Knott said. 

No. 3: Retail Clinics

Walk-in clinics, often located in big retailers like Wal-Mart (WMT: 53.5001, 0.0901, 0.17%) and Target (TGT: 51.015, -0.255, -0.5%) and staffed by nurse practitioners, are becoming more popular thanks to their convenient locations and no-appointment-necessary policy, according to Devon Herrick, a senior fellow for the National Center for Policy Analysis.

“A retail clinic can cut your bill in half compared to that from a doctor’s office or the emergency room,” Herrick said. The clinics can offer routine services like immunizations, strep tests and prescriptions.

“Many times the quality of care is equal, if not better, than traditional treatment in a doctor’s office,” Herrick said. A recent study from Deloitte estimates there are roughly 1,100 to 1,200 retail clinics nationwide.

No. 4: If Possible, Pay With Cash

The discount varies from hospitals and doctors, but you will get a discount if you pay for a procedure or appointment in cash, according to Laura Casey, author of “How to Get the Health Care You Want.”

“Make sure to ask the providers about their self-pay discount plan; they should all have one and some have plans that have zero interest.”

Knott suggests using Web sites like healthcarebluebook.com that allow you to put in your zip code and necessary treatments or surgeries, and it will give you an average cost. 

No. 5: Join the ‘Club’

For annual membership fees of $480 for individuals ($40 a month) and $680 for families (less than $60 a month), the “No Insurance Club” offers basic medical services, 12 doctor visits a year and 20 tests and services. The plan offers board-certified physicians and requires no deductibles, no additional premiums and no co-payments.

The program is currently available in nine states, but is looking to expand. Services vary from state to state, but often include services like flu shots, pregnancy testing, annual check ups, vision tests and sports physicals.

“Depending on their individual situation, there could be good news and there could be bad news,” said Amy McAnarney, executive director of the Tax Institute at H&R Block.

Some things affect all taxpayers. The personal exemption, for example, has increased, to $3,650 each for the taxpayer and dependents, up $150 from 2008.

And tax brackets have been adjusted upward by about 5 percent since 2008, said Greg Rosica, tax partner at Ernst & Young and a contributing author to the “Ernst & Young Tax Guide 2010.” That means you might not jump to a higher tax bracket if you earned more.

“Certainly there are benefits there for all taxpayers,” said Rosica. “There are ones that span the entire income spectrum out there.”

Others revisions are more likely to affect low- and moderate-income workers. Income limits for the earned income tax credit have been raised and there’s a new category — families with three or more children. The Internal Revenue Service says one in six taxpayers claim the credit.

Still other changes affect those at higher income levels. The exemption for the alternative minimum tax has been increased once again, this time to $70,950 for joint returns and $46,700 for individuals. If your income is higher than these amounts, you could be subject to the AMT tax.

These changes are among those that happen every year, to keep taxes in line with inflation. But there are a host of other revisions, new for 2009, that will make filing your tax return this year a little more complicated.

For one thing, the standard deduction for taxpayers who don’t itemize has become a little less standard.

The standard deduction itself has increased, to $11,400 for married couples filing jointly, $5,700 for individuals and $8,350 for heads of household. As before, it is even bigger if you are blind or 65 or over.

But new this year, you can take more of a standard deduction if you paid state or local real estate taxes, bought a new car and paid sales or excise taxes and met the income limits, or were a victim of a federally declared disaster.

If you choose to increase your standard deduction by one or more of these items, you’ll have to file a new form Schedule L. Otherwise, you can just enter the standard deduction on Form 1040.

The three deductions — for state or local real estate taxes, sales or excise taxes on new car purchases or net disaster losses — also can be taken by people who itemize.

There are expanded tax credits for home purchases and education. And a tax credit for making your home more energy efficient has been reinstated.

Tax experts caution people to be careful that they’re claiming every deduction and credit to which they’re entitled. A credit reduces the amount of tax you owe; a deduction reduces the income on which taxes are assessed.

You’re likely already receiving the benefit of the Making Work Pay credit under the stimulus bill that Congress passed last year. However, you may have to pay a portion back if you’re a married couple and both spouses work, or if you have more than one job. If you’re a low- or moderate-income worker, you might have some money due to you. A new form, Schedule M, will have to be filed to claim the credit.

“Each year carries with it changes in the tax law. It’s important that people understand what has changed in their personal situation,” Rosica said.

Did you get married or have a baby? Did you buy or sell stock? Did you inherit money, property or other goods?

Jeff Schnepper, MSN Money tax expert, recommends that people sit down with a tax professional at least once every three years to review their life changes and financial situation.

“First of all, it’s deductible,” he said. “Second of all, if you’re not a professional, you don’t know the minutiae. You don’t know all the things you can do right and you don’t know all the things you’re about to do wrong.”

Experts point to common mistakes that people make, which could delay a refund.

According to the Ernst & Young tax guide, some of these errors are mathematical. Others involve omission — like failing to include your Social Security number or those of your dependents. Make sure you pick the correct filing status — head of household or surviving spouse vs. single, for example. And don’t forget to sign your return.

Last year, the IRS received more than 141 million tax returns. Of those, about 70 percent were filed electronically. More than 110 million filers were due refunds, averaging $2,753 each.

The IRS encourages people to file electronically, saying it reduces errors and enables people to get their refunds more quickly. People who file electronically and use direct deposit can get their refunds as soon as 10 days after they file.

This year, the agency estimates that it will take taxpayers using form 1040 an average 21.4 hours to complete their taxes. That includes record keeping, tax planning, and completing and filing the return. The more complicated your return, the more time it will take to complete it.

One major thing that taxpayers will find different this year is the homebuyer tax credit.

“It’s already gone through three iterations,” said Mark Luscombe, principal analyst for CCH’s tax and accounting group.

In 2008, the credit was actually an interest-free, long-term loan. For people who purchased a home in 2009, the credit is a true credit — it only has to be paid back if you stop using the home as your principal residence within three years of purchase. The credit is $8,000 for first-time homebuyers, defined as those who haven’t owned a home in the last three years.

Congress also added a credit for long-time homeowners who purchase a new principal residence — $6,500. To qualify, a homebuyer would have had to live at least five years in a previously owned home.

There are income limitations for both.

There also is an expanded credit for college education.

The new American opportunity credit provides a maximum annual credit of $2,500 per student for each of the first four years of college. The Hope credit that the new credit replaces temporarily covered only the first two years and for most people was smaller. To be eligible, taxpayers would have to pay $4,000 or more in tuition, fees and course materials.

The credit, which phases out at higher incomes, is 40 percent refundable. “This means that even people who owe no tax can get an annual payment of the credit up to $1,000 for each eligible student,” the IRS said.

What about those students who take more than four years to finish college? “If you’re in your fifth year, you’re out of luck,” Luscombe said.

However, there is another credit — the lifetime learning credit — that may be available for students in their fifth or sixth year of college, or in graduate school.

Other changes include the reinstatement of the credit for making your home more energy efficient. The maximum credit has increased, to $1,500 for $5,000 in expenditures on things like insulation, storm windows or an energy efficient furnace.

For people who lost jobs, the first $2,400 in unemployment benefits is not taxable.

To benefit from most of the tax breaks, you would have had to take action before the end of 2009. But there are a couple of exceptions.

You still might be able to claim the homebuyer credit if you have a signed contract by April 30.

And, if at the end of the day you find you owe the IRS money or want a bigger refund, you may be able to contribute to an individual retirement account until April 15 and take a deduction on your 2009 taxes.

If you’re covered by a plan at work, you may be able to deduct a contribution of $5,000 — $6,000 if you’re at least 50 — if your modified adjusted gross income is less than $65,000 if you’re filing as an individual, or $109,000 if you’re married filing jointly.

The state of Maryland announced that it has ordered a large ARM company to suspend collection activities while it winds down operations.
Press Release
BALTIMORE – Sarah Bloom Raskin, Maryland Commissioner of Financial Regulation, today announced that her office, a division of the Department of Labor, Licensing and Regulation, has summarily suspended the collections activities of Rockville-based Mann-Bracken, which describes itself as one of the nation’s largest debt collections law firms. This enforcement action follows an investigation which revealed that Mann-Bracken was ceasing business activities, such as failing to cash checks that had been sent to the firm in connection with collection related matters. Last week, the firm notified Maryland courts that it “will be closing at the end of the month” and was “working with clients to transfer cases.”

“We are determined to make sure that consumers receive the protections they deserve whether collections are done through the mail, on the phone or, increasingly, through our courts. When they do not, we will act and act quickly,” DLLR Secretary Alexander M. Sanchez said.

The State Collection Agency Licensing Board, a board within DLLR’s Office of the Commissioner of Financial Regulation, issued a summary order today that suspends all of the firm’s consumer debt collections activities, including collections actions in Maryland courts, and prohibits the filing of further collections-related cases.

“This is yet another in a string of problems we are uncovering as the collections industry has made a headlong rush for our state’s courtrooms,” Commissioner Raskin said

In their quest to identify creditworthy customers, some are tapping into the information you and your friends reveal in the virtual stratosphere. Before calling the privacy police, though, understand how it’s really being used.

Data rich discussions
According to Nielsen Online, 67 percent of the global online population uses Facebook, Twitter, Linkedin or a similar social media network to stay in touch with friends, grow their business or just have fun. If you’re among them and your settings are turned to “public,” who you’re talking to and what you’re discussing is available to those wanting to sell their wares — and that includes banks and other credit issuers.

Marketing effort
“It’s a marketing trend as opposed to a credit score trend,” says Joel Jewitt, vice president of business development of Rapleaf, a San Francisco, Calif., company specializing in social media monitoring. Rapleaf hunts and gathers social networking transmissions, turning the conversations you have in your network into consumer profiles called social graphs. These graphs provide companies with insight into behavior patterns: what you like and dislike, want and don’t want, do well and do poorly.

Pretty much everything you and your network reveal may be compiled, including status updates, “tweets,” joining online clubs, linking a Web site or posting a comment on a blog or news Web site.

“In the past, marketing products to people was primarily done via demographics — age, sex, location, education, etc.,” says Jewitt. “That data isn’t always so accurate, though.” Demographics have given way to multi-dimensional behavioral targeting that allows creditors to draw conclusions about what type of credit customer you may be. The idea is “like follows like” — so if your online friends express curiosity about something, so too may you, whether you say so or not. 

According to Michael Gorman, vice president of Acxiom, a company that builds and maintains databases creditors use to market products, joining social networks can work to your advantage. “A big part of what credit card companies do is make decisions about what to offer different people — who to send a balance transfer offer to or offer credit protection.”

Jesse Torres, president and CEO of Pan American Bank in Los Angeles, agrees that Rapleaf and other online information aggregators fill a need within the banking community. “They’re able to scour the social media universe. They are constantly listening and reporting back.” By knowing what people are saying, financial institutions can make the most of their marketing dollars, says Torres, and provide consumers with what they want.

Lowering lending risk
Another reason credit issuers are looking to this data is to reduce lending risk. Social graphs allow credit issuers to know if you’re connected to a community of great credit customers. Creditors can see if people in your network have accounts with them, and are free to look at how they are handling those accounts.

The presumption is that if those in your network are responsible cardholders, there is a better chance you will be, too. So, if a bank is on the fence about whether to extend you credit, you may become eligible if those in your network are good credit customers.

“Credit card companies have been stung very hard during this downturn, and they’re going to work that much harder to avoid extending credit to people with a high level of predictable losses,” says Ken Clark, author of “The Complete Idiot’s Guide to Boosting Your Financial IQ.” “Social graphs can preemptively cut the amount of charge-offs by not giving high-risk people a card. It may translate into hundreds of millions of dollars industry wide.”

The Lending Club, a peer-to-peer lender, uses multiple sources of “social information collateral” for its decision-making processes. According to Rob Garcia, senior director of product strategy, the company incorporates social media and network information into its identity verification and fraud detection mechanisms.

“We use social chatter as a way to bring risk down. It’s a wealth of information about a person,” says Garcia, who gives the example of a Facebook user who posts a home address. “If a person says he lives in a different area than the one on the application, it could be a flag. But if it matches, it greatly increases confidence.”

Having a robust online social network can also expedite loan acceptance. “When people have large networks, they get funded two to three times faster than without,” says Garcia. Why? “We notice that good credit people invite good credit people; bad invite bad.”

To be clear, creditors aren’t accessing the credit reports or scores of those in your social network, nor do those friends affect your personal credit rating. Jewitt asserts that the graphs aren’t being used to penalize borrowers or to find reasons to reject customers, but quite the opposite: “There is an immediate concern that it’s going to affect the ability to get a financial product. But it makes it more likely” that it will work in their favor,” says Jewitt.

Privacy concerns
Not everyone in the industry is jumping on the bandwagon. “It’s difficult to make a judgment about an individual’s credit based on the people around them,” says Gregory Meyer, community relations manager for Meriwest Credit Union in San Jose, Calif. Meriwest only assesses credit report and application data to make lending decisions. “[Social media] is a great way to keep up with what my 10-year-old nephew is up to, but it doesn’t have a place in the credit process.” Still, he does say that business loans may be an exception. “I can see how Facebook would come into play — it would be useful to look at comments about a person’s business, see what the complaints are and how they respond to them.”

Linda Sherry, spokeswoman for consumer advocacy organization Consumer Action, accepts that social media data could help with marketing, but doubts its efficacy in risk management. “When you get outside of a personal credit report, it doesn’t seem like social graphs would help anyone,” says Sherry.

All of this gives way to a lot of worry about how what you make public can be used and who will see it. Jewitt says institutions using Rapleaf’s social graphs have made it clear they want to use the data positively.

Still, concerns about how a company uses social media information may be justified. What you divulge can have unintended impact. “We’ve seen this with applicants not getting jobs and employees getting fired for their Facebook and Twitter-based escapades,” says Clark, “so we shouldn’t imagine this to be any different.”

Consumer advocate Sherry, however, says this about personal-though-public conversations being surreptitiously gathered and distributed. “It’s rotten. It’s really not something they should be doing. They may be gaining information from people who are naive and not understanding how their profiles are set. It verges on privacy violation.”

Jules Polonetsky, co-chair and director of Future of Privacy Forum, supports behavioral marketing but considers this is an extreme use of if it. “It’s shocking to users. It goes beyond the kind of data use that people feel comfortable with.” More, he says, this application of behavioral marketing risks driving legislative action. “The general use of data is the subject of hot debate in Washington. The Federal Trade Commission is examining its view of behavioral data, trying to get to the appropriate rules. The entire future of behavioral marketing use is up in the air and this could upset the apple cart.”

What social network users can do
If you’re not wild about the prospect of being prospected, take steps to guard your privacy. “I think it is crucial that everyone visit the privacy notices for the sites they use, read them, and change their settings to limit who can see their information,” says Clark. “For example, on Facebook, you can change your privacy settings so that only your acknowledged friends can see the vast majority of your information.” You can also enable “private filtering” on your browser. Do so and your activity will be entirely out of the Web profiling system.

Scott Stevenson, president and CEO of EliminateIDTheft.com has further tips:

Hey Frank,
Since you’re an authorized user on her account, your wife’s late credit card payments will hurt not only her credit score, but yours as well. Luckily, you can take action to erase the negative items from your credit report.   

Getting yourself listed as an authorized user on a credit card account with a lengthy and favorable history can help your FICO score. That’s because once you’re on the card, the card’s history will start appearing on your credit report. Depending on your circumstances, it can make you look as if you’ve been handling credit wisely for much longer than you actually have. That makes you appear less risky to lenders, thus improving the chances that you will get approved for that card, car loan or mortgage — and with decent terms.

But there’s a flip side — as you’re having to discover the hard way — because your credit score can also suffer when the primary account holder makes a mistake. In your case, your wife’s account includes two critical errors. But, in most cases, by contacting her bank, you can distance yourself from your wife’s credit slip-ups and allow your credit score to recover.

On the scale of credit mistakes, your wife’s blunders were pretty serious. “Having late payments on your credit reports is the single most damaging thing you can have, other than bankruptcies, repossession or collection accounts or judgments,” says Jose Rivas, a financial educator for Nation Wide Consumer Debt Relief. 

But, as the authorized user, how will her mistakes impact you? As you are probably aware, banks report authorized users’ account information to the three major credit bureaus. Once they have that information, Equifax and TransUnion list both the positive and negative information from shared credit card accounts on authorized users’ credit reports, while Experian only includes the positive data from those accounts. Later, when a snapshot of your credit report is used to generate your credit score, the FICO credit scoring model considers all your account information — whether you’re the primary account holder or just an authorized user. That means your wife’s late payments are also likely to hurt your credit score.  

I’m guessing that your concern, Frank, is that taking yourself off your wife’s account will shorten your own credit history. But in this case, it’s the less damaging option: While FICO’s credit scoring formula does consider the length of credit history, that factor is weighted much less heavily than a record of on-time payments. Additionally, because your wife’s late payments are relatively recent, they are more damaging than they would be if they had happened more than two years ago. That’s because negative items on a credit report have less impact on a FICO score as time passes. Of course, that also means that if both of you behave responsibly with credit from now on, your credit scores will eventually recover from that damage — if you are willing to wait it out. 

If, however, you are considering applying for a loan or a new job in the near future, you’ll want to take immediate action to minimize the damage to your FICO score. To do that, you’ll need to get in touch with your wife’s card issuer.

While you don’t mention which bank issued her credit card, the chart below — reported by CreditCards.com senior writer Connie Prater — gives you an idea of how several major issuers treat the process of removing an authorized account user.

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In most cases, either the primary cardholder or the authorized user can simply call or write the issuer to make the request and the removal of his or her name from the credit card account will take effect immediately. However, as the piggybacker, it may take longer for your wife’s credit card account to come off your credit report. For example, Experian has said it could take 30 to 60 days to be removed. (You can, however, attempt to speed up the process by contacting Experian, Equifax and TransUnion directly.) Regardless, you’ll want to ensure that the credit card issuer stops sending information on you (as the authorized user) to all three credit bureaus. That’s why you should go ahead and contact your wife’s bank to make the necessary request.

At the same time, to help her credit history, you can also add your wife as an authorized user on any credit cards you have maintained for some time and always paid off. That way, your consistent and responsible payment behavior will benefit both your credit score and your wife’s, too. 

Unfortunately, there’s no quick route to achieving a high FICO score, and removing yourself from your wife’s account may mean that your credit history gets shortened somewhat. However, if you behave responsibly with credit over time — always making payments on time, keeping balances low and only taking on new debt when necessary — you will eventually build a solid credit history and have the FICO score to prove it.

The provision in question is the compulsory arbitration of disputes, a procedure that critics say works against the best interests of consumers, partly because it prevents them from taking their complaints to court.

Several of the nation’s largest credit card companies — including Chase and, just in recent weeks, Bank of America and Capital One — have announced that they are dropping the arbitration requirement from their consumer agreements or will not enforce it.

Credit card issuers say customer service representatives will redouble their efforts to resolve disputes at that level. If that doesn’t work, the courts will again be the answer.

The case for and against arbitration
But, for now, tens of millions of credit card and other consumer contracts still contain provisions requiring the arbitration of disputes between the customer and the lender.

Defenders of the procedure say decisions by private arbitrators are fair and relatively swift, and the program keeps the court system from becoming even more bogged down than it already is.

But consumer advocates say arbitration often is stacked against the consumer. That’s because arbitrators almost always are hired by the lenders and, thus, are to some extent beholden to them.

“Legally, we call these ‘adhesion clauses,’ meaning you get it and you have to agree to it,” said Merrill Davidoff, a Philadelphia-based attorney. “We consider them very overbearing, one-sided clauses that required consumers to bring disputes to arbitration and denied consumers the right to participate or institute class actions.”

The tipping points
And, so, the action accelerated during the summer. Issuers are believed to be in negotiations with lawyers representing consumers in a class-action lawsuit. At the same time, the Obama administration and powerful members of Congress are calling for federal action to restrict or eliminate mandatory arbitration of disagreements between credit card users and lenders.

“We think this trend, in the first five or seven years of the decade, very much went against consumers and in the favor of banks and insurance companies,” said Davidoff. His firm, Berger & Montague, four years ago filed suit accusing a number of credit card issuers of unlawfully colluding against consumers by requiring them to arbitrate disputes.

“But we’ve won some victories turning back the tide of arbitration,” Davidoff said. “One way or the other, these arbitration clauses will become less prevalent.”

So, where will this leave consumers?

Exhibit A: On July 14, Minnesota Attorney General Lori Swanson filed a lawsuit that accused the National Arbitration Forum (NAF) — one of the largest of such firms, handling more than 200,000 disputes a year — of deceiving consumers.

She said the company portrayed itself as a neutral arbiter, even though it was affiliated with one of the nation’s largest debt collection agencies. In addition, the suit alleged, NAF maintained close ties to credit card issuers.

A 2007 arbitration study by Public Citizen, a consumer rights organization, found that consumers lost 94 percent of the cases filed by MBNA (now owned by Bank of America) and arbitrated by NAF.

Just four days after the Minnesota suit was filed, NAF agreed not to accept new cases from credit card companies, banks, utilities, health care operations, cell phone companies and many other firms.

Exhibit B: Even a leading group of arbitrators called for reform.

A few days after NAF capitulated, a representative of the American Arbitration Association (AAA) told a U.S. House subcommittee that action was required.

“A national policy committee dedicated to meaningful reform can enhance an array of due-process elements so that there is deeper fairness and transparency,” Richard Naimark, the AAA’s senior vice president, testified to Congress.

“Consumers deserve an alternative to litigation,” he said, “but they also need to be able to trust that option.”

At the same time, the AAA said it was suspending its consumer debt collection programs.

The dam was broken.

Issuers take action
Chase soon announced that it would stop filing arbitration claims against consumers, and Bank of America said it would stop enforcing the provision in its consumer credit card agreements.

In December 2009, Capital One joined in the retreat and Bank of America took its action a step further, saying it would eliminate the provision from its consumer and small business credit card contracts.

All three also tentatively settled their portions of the class action lawsuit filed by Davidoff and his firm, though Capital One and Bank of America say their decisions to terminate their arbitration program were not directly related to that legal settlement.

“The implication that the litigation drove our decision to drop arbitration from our agreements is incorrect,” said Pam Girardo, a spokeswoman for Capital One.

She said the “vast majority” of customer disputes already were being handled in other ways, primarily through discussions with customer service representatives, and the bank’s policy for some time has been not to use mandatory arbitration for collection purposes.

“In fact, we’re scheduled to send new cardholder agreements to all customers in January 2010, and we decided to drop the mandatory arbitration provision because it has not been utilized often enough by either our cardholders or Capital One to warrant having it remain in the agreement,” she said.

Said Shirley Norton, a spokeswoman for Bank of America:

“Both sides agreed to the settlement to avoid the costs and uncertainty of further legal action. Bank of America denies any liability or wrongdoing in the matter and believes that it fully complied with all laws.”

When the settlement is approved by the court, she said, all current consumer and small business credit cardholders will be notified that the mandatory arbitration provision has been eliminated.

“Next year, we will incorporate the new policy into all new consumer and small business cardholder agreements,” Norton said.

Several other credit card issuers, including Citi and Discover, are still named in the suit and have not made recent announcements, but the trend away from forced arbitration is clear.

“We afford all card members the choice to accept or opt out of arbitration,” said Matthew Towson, Discover’s senior manager of community affair and media relations.

“If the card member chooses to opt out, we do not close their account, and they still would retain all card member privileges,” he said. “Discover also does not initiate arbitration as a means of enforcing customer collections.”

What’s next?
Though the much discussed Credit CARD Act of 2009, which delivers various reforms (many of which take effect in February), doesn’t deal with arbitration, a House-passed law to create a Consumer Financial Protection Agency would give that office the authority to eliminate, or at least curb, consumer arbitration.

Two other bills restricting consumer arbitration also were being passed around Congress this year.

Taken as a whole, the future of consumer arbitration seems clear — and not very promising. And consumer advocates are pressing their advantage.

“These reforms are occurring because the Minnesota attorney general’s lawsuit exposed that credit card companies and supposedly neutral arbitration companies were colluding,” said Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group (PIRG), a federation of consumer interest organizations around the nation.

“The modest actions by some, but not all, [credit card] firms do not eliminate the need for full-fledged congressional bans on forced arbitration,” he said

Sooner or later, almost every consumer has a dispute with a merchant over goods or services.

In such cases, you can and should gripe directly to the merchant, but consumers who use credit cards to make purchases have an added layer of protection when disputes arise — if they know how to use it.

Here’s how it works.

The players and their roles
When a dispute arises, consumer can take steps to resolve it, but the complex landscape means success is not guaranteed. Six players are involved, all with different motivations. When a credit card is used in a disputed purchase, the six parties to a dispute are:

• The consumer: You bought it, but you don’t like it.
• The consumer’s card issuer: This is the financial institution that issued the credit card to the consumer. Many issuers offer protection to the consumer beyond the minimums set under federal law. It may want to help you in a dispute.
• The merchant: Its return policies, its desire to keep you as a customer and its level of fear of the credit card giants will create the initial playing field.
• The merchant bank: This is the bank the merchant uses to accept credit cards for transactions. Disputes are a hassle to the merchant bank.
• The law: Under the Fair Credit Billing Act, credit card purchases get some protection.
• The transaction processor: Visa, MasterCard, Discover and American Express all have giant networks that pass money along to make credit card transactions work. Each has its own rules for participating merchants, merchant banks and card issuers.

The interplay between all six players will determine whether you actually can return that defective gadget or get your down payment back. But in general, paying by credit card gives consumers an advantage in the game. That’s because consumers may enlist their credit card issuers to help mediate or resolve disputes.

“A dispute right may potentially be available if the cardholder can document and support with corroborating documentation, a mischaracterization of the described goods or services or dispute concerning the established quality of goods or services provided to the cardholder,” says MasterCard spokeswoman Joanne Trout.

What federal law does, doesn’t cover
Let’s start with consumers’ legal rights.

The Fair Credit Billing Act was passed in 1975 as an amendment to the Truth in Lending Act. True to its name, the billing act’s primary goal is to establish consumers’ rights when goofs occur on the bill — unauthorized charges, fraudulent charges, math errors, billing addressing mistakes and the like. The Federal Trade Commission Web site lays out those rights in detail, and includes a sample letter people can use to object formally to mistakes on billing statements.

One section of the act (Section 170) covers disputes about the quality of goods or services. The first thing to understand about it is it bestows no rights to consumers in regard to merchants, so if you’re dissatisfied with a purchase, don’t wave the act in a merchant’s face like a magic refund wand.

The act instead allows consumers to take action against credit card companies, under restricted circumstances.

The act:

• Allows consumers, when dissatisfied, to sue or assert other defenses against their credit card companies.
• Requires consumers to make a “good faith attempt to obtain satisfactory resolution of a disagreement or problem relative to the transaction” from merchants.
• Restricts these rights to transactions exceeding $50.
• Requires the purchase to have been made in the same state as the consumer’s address, or within 100 miles of the consumer’s address.

Card issuers’ additional protection
Because the law lets consumers sue them, and because they want their customers to like them, the larger credit card issuers have voluntarily waived the act’s $50 and geographic limits and will help in any dispute.

So if you have already made a good faith attempt to resolve the issue with a merchant, and you’re still dissatisfied, it’s time to escalate the issue, enlist your credit card issuer’s help and seek a “charge-back.”

What is a charge-back?
A charge-back, in essence, reverses a credit card sales transaction. The Visa merchant agreement defines it as “a transaction that a card issuer returns to a merchant bank as a financial liability and which, in turn, a merchant bank may return to a merchant.” Got it? The debt for the purchased item gets pushed back up the line: from you, to your card issuer, to the merchant’s bank and back to the merchant, all through the transaction processor’s network. It removes a charge from a cardholder’s bill and — through the middlemen — “charges back” the amount to the merchant.

It’s a big stick for the consumer. With a charge-back, the merchant loses a sale and eats the costs of processing the charge-back. In addition, a merchant who has too many charge-backs faces additional charges from card processing companies.

Card issuer as ally
Consumers whose good faith attempts with merchants have failed should contact their credit card issuers to seek a charge-back.

At that point, card issuers can turn into valuable allies.

For example, Chase, the second-largest card issuer in the United States, says it becomes an advocate for its customers.

“We try to make the dispute process clear and simple for our customers and provide a variety of ways to initiate a purchase dispute through the service channel the customer most prefers,” says Chase spokeswoman Elaine Franck.

Chase customers can call the bank to file a dispute with a specially trained dispute advocate, or go to Chase.com and submit a dispute real-time online or submit a dispute in writing.

“We can even conference in the merchant with the customer on the line to expedite the process. If further review is necessary, we remove the purchase amount in question from the customer’s balance while we investigate,” Franck says.

Two-way process
Some card issuers will remove a charge from a bill while it is under dispute, but it is a two-way process. Merchants can assert they were correct in a dispute, in which case the card processing company makes a decision. Both Visa and MasterCard have arbitration procedures that may result in a disputed charge being finally dismissed — or reinstated on a consumer’s bill.

If a consumer still isn’t satisfied, the courts are the only recourse.

But the credit card companies’ dispute processes do give an alternative short of lawyering up. Bank of America helped Denise Bauwens, a Pennsylvania resident, receive a $300 refund for a set of teak rocking chairs from an online store. 

When the chairs she long wanted arrived, Bauwens says, one was broken. She sent several e-mails to the online retailer and “called every other day for two weeks. No response,” Bauwens says.

She filed the dispute paperwork through Bank of America and 10 days later, the charge was taken off her card.

“They considered it an appropriate dispute,” she says.

The FTC said it is the second major law enforcement effort this year against telemarketers.

The cases announced Tuesday were filed in federal courts in Florida, Georgia and Illinois. They name Economic Relief Technologies LLC; Dynamic Financial Group (U.S.A.) Inc., and JPM Accelerated Services as defendants. Several affiliated companies and individuals were also named.

The FTC alleges the firms made illegal prerecorded automated calls to consumers claiming credit card interest rates could be lowered if consumers would pay upfront fees ranging from $495 to $1,495.

After getting the money, the FTC says the companies did not try to negotiate lower fees for the consumer and, although they told consumers they could get a refund if their card rates weren’t lowered, few refunds were actually paid.

The FTC asked the court in each case to issue an order temporarily halting the automated calls pending trial.

In May, the FTC filed two cases that led to court orders stopping other telemarketers from using robocalls with deceptive claims about extended auto warranties.

Since Sept. 1, virtually all robocalls have been illegal, unless the recipients have provided written authorization to receive the prerecorded calls.

The FTC’s recently released “National Do Not Call Registry Data Book for Fiscal Year 2009,” says more than 191 million telephone numbers have been placed on the Do Not Call registry