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TIPS FROM ASK DR. DEBT

On our show today, Rozanne Andersen from AskDoctorDebt.comgave us some persona finance tips. Have some questions? Send them to us. We'll answer some more of your questions next Friday. In the meantime, maybe these tips can help you out!

Question: Can debt collectors demand payment or take legal action during the 30-day period for disputing a debt?

Answer: Yes, a debt collector could demand payment or take legal action against you during the 30-day period for disputing a debt. The 30-day validation period is your opportunity to dispute the alleged debt. A debt collector is permitted to pursue collection activity, including filing suit, unless you provide a written request to the debt collector to verify the debt. Once a debt collector receives your written request for verification, the collector must stop all collection efforts until verification is mailed to you.

Question: I disputed a debt but never heard back. I thought collectors had to verify debts?

Answer: If you request in writing verification of a debt within 30 days of the date that you receive the validation notice, the debt collector has two options. The collector can either provide verification of the debt and continue collection activity or the collector can stop collection activity until the collector provides you with verification of the debt. Sometimes, collection activity is halted and the account is returned to the original creditor or cancelled. In that case, if the debt collector never resumes collection activity on that debt, the collector is not required to provide verification of the debt to you.

It is important to note that the Fair Credit Reporting Act (FCRA) has other requirements for debt collectors who report a debt to a consumer reporting agency (CRA). Under the FCRA, debt collectors have to investigate a debt that is disputed within 30 days from receiving the request to investigate the debt if the request is sent by the consumer directly to the debt collector. The Fair Debt Collection Practices Act (FDCPA) does not limit the time in which a debt collector must verify a debt. The FDCPA does require, however, that a debt collector, when receiving a dispute during the 30-day validation period, stop collecting a debt or any part of the debt that is disputed. The collector must stop collection until verification is mailed to the consumer.

Question: Im shopping for a new credit card with air miles, since I can never redeem miles from my old card. Will cancelling my old card hurt my credit? I hate to continue to pay an annual fee on a card I will no longer use.

Answer: Canceling the card may have a negative impact on your credit score if you have maintained a good credit history with that card over several years. You may want to keep the line of credit open for a year of two until you establish a good line of credit with your new card. Then canceling the old card will have less of an impact on your credit score.

Question: How can I lower my student loan interest rate? I consolidated my student loans, and then a couple years ago I kept receiving letters to reduce my interest rate on the student loan. I called, but since I already consolidated, it didnt apply to me. Is there anything I can do to lower my interest rate?

Answer: You could try to re-consolidate the loans through another company, but sometimes this isn't possible with federal student loans. You may be able to re-consolidate private student loans multiple times.

Question: I had been unemployed for a long time. I ran up debt to pay for necessities. Now I am back to work, but at a low-paying job. I have not missed any payments on my debt but I am paying over $200 a month just in interest charges. What can I do to pay my debt more quickly on a meager salary?

Answer: Contact your creditors and explain your situation to them. Ask if they can reduce the interest rate on your credit cards and your loans. If you have a history of paying on time, they may be willing to work with you to make the monthly payments more manageable and reduce interest.

If that doesn't help, you can contact your financial institution about programs that are available to consolidate your credit card debt and other loans and reduce the interest and monthly payments