Subprime Lending Procedures Collections/Recovery

The subprime lending procedures, collections/recovery departments, are subject to the same rules and regulations as all other debt collections. They must follow the guidelines mandated by Federal law.

Subprime lending procedures, collection/recovery, are being heavily scrutinized due to the massive increases in foreclosures. As more and more individuals are finding themselves in financial trouble, subprime lenders are finding that their collections departments are getting busier. How do you know if your subprime lender is acting outside of the law?

First, you have to know what the law is. Go to myfico.com and join the message boards. They can help you get good advice on how to deal with your creditors. You can also find out about the Fair Credit Reporting Act. This is the law that governs what information a lender can report to credit agencies about you and it governs how they can report it. Furthermore, as part if this law, there are regulations about when and how they can contact you about your debt. Realize that rules for the original creditor differ greatly from collection agencies.

Your original creditor can call you during normal business hours. Usually this means between 8am and 9pm Monday through Friday. They do not have to identify themselves as a bill collector and they do not have to tell you that any information obtained will be used to collect a debt. Here is the good news, if you are delinquent on your loan and it has not been referred out to collections, you may be able to work with the creditor. In particular, if you are in trouble with your mortgage, subprime lenders are becoming more willing to help you keep your home. Too many foreclosures are going to get them into trouble with their financial people and with the Federal Government.

If your subprime loan has been referred out to a collection agency, then they must follow different rules. They are required by law to identify themselves as a collection agency. If you send them a request in writing asking them to provide you with written proof that the debt is valid, they must do so. If they do not respond to your requests, you have the ability to file a complaint with the FTC and your State Attorney General's office.

• Your subprime lender can do th following:
  o Contact you directly via phone or mail to collect money owed.
  o Report a debt as past due to the national credit bureaus TransUnion, Equifax, and Experian.
  o Refuse to extend further credit to you.
  o Start foreclosure proceedings if you are more than 30 days past due on your mortgage or home equity loans/lines of credit.
  o Demand immediate payment for a home equity loan/line of credit if you no loner meet their standards for the loan.
  o Demand immediate repayment of the mortgage if they feel the property is no longer able to support the loan amount and/or if the property has fallen into disrepair.
  o Evict tenants that are renting a property that goes into foreclosure. They do not have to give the tenants notice of foreclosure, they can evict them as soon as the foreclosure is approved by the court.

It is always best to try to work out an arrangement with your subprime lender. They do not want your property; they would prefer that you pay the loan. However, if you are in arrears you may avoid foreclosure if you can arrange a short sale. Talk to you subprime lender and find out if they have any subprime lending procedures, collection/recovery programs that can help you.