Loan Modification – A Closer Look

Credit Damage: Getting Compensated for Your Loss

Until recently lawyers for victims of credit damage had little possibility to collect for damages beyond medical treatment, lost wages and property loss. Insurance companies threw up their hands in sympathy, claiming victims can only be compensated for what can be measured – tangible goods and services. But, what happens when the victim has lost considerable time from work, the family bank is broke and monthly payments on mortgages, car loans and credit cards payments are missed? Regardless of the haggling between lawyers and insurance companies, it’s the credit victim who ends up having to live with a bad credit rating.

Today, there are legally accepted means for measuring loss of credit through the procedure of Credit Damage Measurement (CDM). CDM is fast becoming a potent tool for recoverable credit damage awards when the damage is not self-inflicted. Previously, both judge and jury, and especially the insurance companies, refused to acknowledge CDM claiming it was speculative because they could not define it as tangible damage.

However, in case after case, victims of credit damage who use the CDM method are getting compensation for credit loss. Many factors are changing the old mindset including credit bureau technology improvements, the application of the Fair Credit Reporting Act (FCRA), risk scoring sophistication, and the development of CDM as an objective, repeatable method that measures out-of-pocket damage reliably.

Credit Ratings and Recovery

The impact of a bad credit rating is much more significant than most people think. Consider what poorly rated consumers face when they want to lease or buy vehicles, obtain credit cards, buy or lease or refinance their residence. In most cases, it’s an easy decision for the creditor: the credit application is simply turned down or the borrower is charged a much higher down payment – maybe thousands of dollars more with monthly payments that are typically several hundred dollars more.

“A person with bad credit is viewed with suspicion and is charged significantly more for future extension of credit because the lender feels the need to protect against a greater risk or default,” says Tom Key, a civil litigator practicing in Tustin, CA.

“Over the years I have heard reports of financial damages from clients who have been wrongfully terminated, defrauded, injured in an accident or suffered losses from breach of contract,” Key says. “These victims were especially distraught over the fact that their prime credit reputation, carefully nurtured for years, is destroyed overnight. It seemed to me that there must be a way to compensate victims for that type of loss.”

Key has witnessed the reactions of many jurors who failed to award a victim of credit damage their rightful compensation simply because they could not quantify the damages. “Jurors want a specific loss that they can count, hold and see,” says Key. “Their reasoning is that they need to know that it is genuine. They have a tough time awarding damages based on sympathy. In order for them to confirm authenticity of a claim, they want to see its quantification.”

Measuring Loss of Creditworthiness

Assuring authenticity has been a sticky situation when it concerns measuring out-of-pocket loss for victims of credit damage – until now. Attorneys who represent victims of credit damage are now utilizing the Credit Damage Measurement method to recover out-of-pocket losses for their clients.

“CDM measures the actual out-of-pocket dollars reasonably expected from loss of creditworthiness, which includes higher down payments, higher points and costs on loans, higher interest rates, higher monthly payments, or outright denial of credit,” says Key. “In addition, the CDM method also calculates the rates, costs and other terms applicable to the resulting credit rating by lenders and projects the results over the relevant number of years for the types of loans the client is likely to seek.”

Key continues, “For example, if a client’s credit was near perfect before a triggering event, and is subsequently damaged by the event, the CDM procedure can illustrate before and after analyses, calculating the cost of the same loans with the two different credit reports, Pre- injury credit compared to Post-injury credit.” In many cases, CDM clients have already realized significant compensation. In one such case CDM was instrumental in recovering $56,000 for damaged credit reputation. “That calculation is the difference between what refinancing a $140,000 loan would have cost my client with their prior rating, and what it will cost them out-of-pocket with their damaged credit rating -measured over a seven-year period.”

Isolated Compensation vs. Repeatable Compensation

The CDM method of measuring intangible credit loss is increasingly becoming the basis of recovery for victims of credit damage. It’s changing the way judges and juries measure recoverable out-of-pocket loss, and then can compensate for loss of credit expectancy. Certainly there are still some skeptics, mostly defendants. Technically, credit damage measurement is intangible. However, CDM has proven an objective and practical procedure to calculate out-of-pocket damage for companies or families to compensate for their credit damage.

“To have this kind of measurement is an exciting complexity in our society,” says Key. “CDM is very understandable and a rather simple way to come to a conclusion of loss for the victim. If you understand the math and are an expert at reading credit reports, the calculations and recovery are undeniable. It’s a method of turning isolated compensation into repeatable compensation. It’s changing the way jurors rule on these damaging cases. Because of this method, victims of credit damage can be more fairly and more completely compensated for out-of-pocket damage.”

Georg Finder, president of CM Financial Services of Fullerton, California, wrote and presents the first State Bar accepted continuing legal education seminar on credit reports and credit damage. He can be reached at gfinder@creditdamage.com (714) 441-0900 or at http://www.creditdamage.com

19,178 Identity Theft Victims Per Day – Are You One Of Them?

Identity theft statistics are shocking. And we are told that it will only become worse, before it gets any better. Are you likely to be affected?

According to recent studies, up to 7,000,000 people become identity theft victims each year, in the United States alone. That’s over 19,000 cases a day, or 799 cases an hour. Whichever way you look at it, these are shocking figures. And with more and more people using the Internet, online banking, and other hi-tech services, things aren’t likely to improve any time soon.

In fact, another research, a survey conducted on behalf of the Federal Trade Commission recently, tells us that the situation is even worse. According to the FTC survey report, 4.6% of the US population were identity fraud victims last year – that’s 10 million people.

According to the FTC figures, if someone fraudulently opens a new credit card or another loan account under your name, on average you can expect the dollar amount to go to about $10,200. That’s just an average amount.

To clean up your name, and your credit rating, you will need to deal with this experience. You can expect to spend between $500 and $1,200 of your own hard-earned money cleaning up the mess. You can also expect to invest between 30 and 60 hours of your time.

The above figures are just cold statistics. They say nothing about the emotional trauma, through which you are likely to go when it happens to you. It’s all very well to read and hear about bad things that happen to other people. It is quite different when the same thing happens to you, or your loved one.

Is there anything you can do in order to protect yourself? There is. Quite a bit actually. It’s all based on common sense and, while there are no guarantees in life, you will minimise the risk and make the life of an identity thief a lot harder.

Funny thing about thieves. They don’t like working hard. If you make it hard enough for them, they will usually go away – to find an easier target.

One of the common-sense things you can do in order to protect yourself, and your family, is to make yourself aware of the current scams that may affect you.

The most infamous one at the moment is so a called ‘phishing’ scam. In a nutshell it looks like this:

You get an email that looks like it was sent from your bank. They ask you to log in to your online account and verify some of your details. For your convenience, there is a link included right in the email. All you have to do is click on it an log in. Don’t ever!

The moment you click on that link and log in, the scam artists have your login ID and password recorded. This will enable them to log in to your account and within hours, or days, your account will be cleaned out!.

There are two common-sense approaches to deal with this.

First, you have to realise that your bank already has all the details they need to operate your online account. If they didn’t, you wouldn’t be able to open it in the first place. So, you can most likely quite safely delete the email and forget about it.

Secondly, if you have any doubts as to the authenticity of the email, you can get the bank’s phone number from your local phone book and give them a call. Tell them about the email you received and ask if they tried to contact you. I bet they are going to be as surprised as you are.

And just remember: Whatever you do, never, ever, log in to your bank account, or any other sensitive account for that matter, right from an email. You already have the login link somewhere in your records. If not, go to the bank’s main page and look for an online login page.

What we covered today is just one of the things you need to do in order to protect yourself from identity fraud. There are many more. Lack of space doesn’t allow me to cover more in this short article. You will find many more tips at http://www.credit-report-a-z.com/articles.html. They are free to implement and could save you lots of time and money.

Andrew Obremski is the owner of www.credit-report-a-z.com, a web site devoted to information about credit reports, identity theft, debt, and other personal finance topics.