Banks’ bad loans now top $1 billion

Around 80 commercial banks, chartered in the St. Louis region, had made up $66 million in profits, by this time last year. This year they have recorded $169 million in losses.

The main cause behind the downfall is bad loans, as the real estate problems spread from residential to commercial real estate. Bad loans, which can also be called nonperforming loans, increased 69% to $1.05 billion in the first six months, from $620 million a year earlier.

According to The Federal Reserve Bank of St. Louis, ten banks recorded losses in the first half of last year; while 17 did this year.

Many banks have shown loss
Bob Witterschein, chief executive of the Southwest Bank said that he was not terribly surprised by the numbers, which are a function of a weak economy. A number of banks have shown a loss for the first six months of 2009 due to charge-offs and a desire or necessity to build their loan loss reserve for potential future loan issues.

Performance of First Bank
The performance of First Bank wasn’t much promising too. It has lost $174.5 million so far this year, compared with a loss of $30 million at this time last year. In comparison, the other banks made a little more than $5 million in profits during the first half of this year, but they also made $62.5 million in profits in the first half of last year.

Heavy lending in the housing markets has led to the downward trend
Terry McCarthy, president and chief executive of First Bank said that First Bank is the biggest and most geographically scattered of the banks, with $10.4 billion in assets and locations in four states, including California and Florida, both hit hard by the real estate collapse.

All the banks, facing downfall, range widely. The second largest bank chartered here is Southwest, with $6.5 billion in assets, and the smallest is Chesterfield State Bank, with $16 million in assets.

Many banks have received capital injections under TARP
Several of the banks have received capital injections under the federal government’s Troubled Asset Relief Program (TARP), including First Bank, $295.4 million, Reliance Bank, $40 million; Enterprise, $35 million; the Business Bank, $15 million; Bank Star $8.6 million; Triad Bank $3.7 million; and Fortune Financial Corp., $3.1 million.

The fair debt collection practices act

The topic can be found in The Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809, in which it is stated that:

a. Within five days after the initial communication with a consumer, in connection with the collection of any debt, a debt collector shall send the consumer a written notice containing the following, unless the following information is contained in the initial communication or the consumer has paid the debt.

1.The total amount of the debt;
2.The creditor’s name, to whom the debt is owed;
3.A statement saying that the debt will be assumed valid by the debt collector, unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt.
4.A statement that if the debt collector is notified by the consumer, in writing, within the thirty-day period that the debt is disputed, the debt collector will have to obtain verification of the debt or a copy of a judgment against the consumer. The debt collector will also mail a copy of such verification or judgment to the consumer.
5.A statement that, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor, upon the consumer’s written request within the thirty-day period.

The debt collector should cease the collection process
b.If the debt collector is notified by the consumer in writing, within the thirty-day period, as described above in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector is bound to cease the collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

The Essence of the Issue
In layman terms, the above-mentioned things mean that if you write a letter to the collection agency, disputing their claim within 30 days of receiving their initial letter, they must show you written proof that you owe the mentioned debt(s). And for the proof to be legitimate, they must include the following:

A copy of the original signed credit card application or financing agreement
Account statements from the original creditor
Some proof that the mentioned collection agency has been assigned to the debt
Send a letter to the Credit Bureaus
You should also send a letter to the credit bureaus, disputing the information involved in the collection account. In case the collection agency fails to write back within 30 days, but you do get a letter from the credit bureaus saying the debt it verified, you have the authority to send another letter to the credit bureaus claiming the collection agency did not respond to your request for debt validation, and thus has not complied with the FDCPA.

Most probably, the credit bureaus will remove the collection account when this happens, as you failed to receive validation of debt despite the credit bureau reporting it as verified.

Threaten with a lawsuit if they don’t cooperate
But if they don’t cooperate, you can write a new letter threatening them to file a lawsuit for willful non-compliance. Of course you don’t want to go that far, especially if it’s not a large amount or too damaging to your credit. But it should speed things up.

It is also possible that the collection agency is attentive and gets the material you ask for in a timely fashion. If they validate the debt, you won’t have much options left and will have to pay the debt or risk a charge-off or potentially a lawsuit.

It is important to carefully put aside all the original documents you use to state your case. And it is better to be careful when you approach both the debt collectors and the credit bureaus. If you are unfamiliar with the law, it would be wise to seek legal help before pursuing a lawsuit.

Debt relief can start at the grocery store

When we try to fight off debt, we always focus on larger purchases and spending where most of the money is utilized. But what we fail to understand is, that the small purchases that are made on a daily bases account for a big part of that debt.

Two-thirds of purchases at grocery stores are done impulsively
It has been acknowledged that in general, at least two-thirds of purchases made at grocery stores are done impulsively. This adds up greatly to the amount of wasteful spending that harms people financially and stops them from getting rid of debt entirely. A little saving done here can save up a lot of money that can be used to pay off bills.

Shop wisely and reduce your cost
Although it may seem difficult to save when going to the grocery, but it can certainly help you in the long run. Reducing your spending may require you to change your cooking tastes, which might be difficult for some people. But it can become enjoyable eventually. And keep in mind that it’s entirely possible to reduce the cost of your favorite types of food simply by shopping wisely.

Cook yourself, or look for sales
Try to cook yourself instead of going for canned or frozen foods which are more expensive. You can save a lot of money by cooking on your own, but that may not always be feasible either. You can also go for a cheaper brand, and shop specifically for sales and discounts when they apply.

Whole foods are the cheapest
The taste might be different, but the fact is that whole foods are the cheapest. It is much cheaper to buy a whole potato as compared to the cost of a frozen baked potato, for example. And you never know, it might taste better too.

Make a shopping list
By making a shopping list, you can cut back on all the purchases that you would otherwise make simply by browsing a grocery store. This can alone save a ton of money, and can help you pay your debt.