The debt collector who wanted $8.97

2:00 PM collector, wanted No Comments

| By Deanna Templeton, Credit.com

Debt collection is a big business, and companies are looking for any advantage they can get. Even if you owe just a few dollars, pay up.

We recently received a question from a reader who is looking for help with a past due movie rental that went to collections:

Today I received a letter in the mail from a collection agency stating that a DVD I rented from Family Video (probably 5 years ago) has gone to collections. The total that I owe is $8.97. Am I going to get a bad credit score for an unpaid bill of $8.97?! Help would be greatly appreciated.

-- Jillian

The debt collection industry has grown into a multi-billion dollar business, and in order to stay competitive and profitable, collection companies are buying collection account portfolios from almost any company that’s willing to sell them or commission them to collect on their behalf. This includes credit card issuers, auto and mortgage lenders, cell phone companies, utility companies (cable, Internet, water, etc.), public libraries, gyms — and even video stores, as evidenced in your case.

A few years ago, these types of low dollar collections made headlines when a number of people began receiving collections for old, unpaid library fines that had been turned over to collections and reported in their credit reports. Yes, even minor past-due debts can turn into collections, regardless of how minor the amount. It’s something we should all be aware of.

If you find that you owe a small debt that seems trivial or insignificant and you’re on the fence about paying, it’s better to pay it than risk the chance of it turning into a collection and potentially hurting your credit down the road. No one wants to deal with the hassle of a collection, and it’s important to remember that a forgotten movie rental can happen to any of us.

The short answer here is: It depends. If the collection agency reports the collection to the credit bureaus, the answer is, yes, it will most likely have a significant impact and hurt your credit score. When it comes to collection accounts, the amount of the collection has no direct impact on your credit score. It’s the fact that the account made it to collection status that matters. This means a collection of $8 is just as damaging as a collection of $5,000 — with two exceptions.

In late 2008/early 2009, FICO made several significant updates to the FICO credit score model, including how low dollar collections were factored in the score calculation. In the FICO8 model, collection accounts less than $100 are excluded from the calculation. This means an $8 collection would have no impact on your credit score. It’s important to understand that this is only the case with the FICO8 version of the FICO score. And although lender adoption of FICO8 continues to grow, many lenders are still using older versions of the model. You also have to consider that some lenders may not use the FICO score at all — many do, but some do not.

Some lenders may use VantageScore 3.0, the newest version of the VantageScore model. This model doesn’t factor in any collection accounts that have been paid or settled. So, if you pay the $9 collection account, it won’t impact your new VantageScore 3.0.

If you receive a collection letter in the mail, it’s important that you address the collection as quickly as possible. If you think the debt might not be yours or you don’t agree that you owe the debt, you only have 30 days to dispute the collection and request that the debt be validated.

If the collector is unable to validate the debt by providing written proof that the debt belongs to you and that you do in fact owe it, they have no grounds for pursuing the collection and must stop all further collection attempts. If they don’t, they will be in direct violation of the Fair Debt Collection Practices Act.

If the debt is valid and you owe it, it’s best to pay it. For higher dollar collections, we’d normally suggest negotiating a settlement over paying the full amount, but there’s not much room for negotiation with an $8 debt.

It would be worth contacting the collection company directly to find out if they plan to report the collection. Order copies of your credit reports from AnnualCreditReport.com to confirm whether or not the collection has been reported yet. You can also monitor your credit score every month to ensure it isn’t reported using the free Credit Report Card.

If the collection agency has not yet reported the collection, it may be in your best interest to go ahead and pay the $8 rather than going through the hassle of disputing or validating the debt.

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Help wanted: Diamond polishers in Israel

10:00 AM Diamond, Israel, polishers, wanted No Comments

Ari Rabinovitch and Tova Cohen , Reuters

RAMAT GAN, Israel - Diamond manufacturing is a dwindling trade in Israel. The country has one of the world's hottest diamond exchanges, but polishers and cutters of the precious stones have been replaced by cheaper workers in newer hubs like India and China.

Israel wants to bring them back. To do so, it plans on recruiting a legion of ultra-Orthodox Jews, who because of their dedication to prayer and study, have been unable or unwilling to join the work force, putting a heavy weight on the economy.

The job of a diamond polisher, however, is unique, said Bumi Traub, president of the Israel Diamond Manufacturers Association. It need not disrupt their pious lifestyle.

"The profession is fitting. You deal with the rock, and if you need to go pray, no one will bother you," he said.

The door to Traub's office requires a fingerprint scan. Security is tight in the four-building exchange where annual turnover of trading reaches $25 billion each year.

About a third of rough diamonds produced in the world each year pass through the Jewish state and diamonds account for more than a fifth of the country's industrial exports.

It was a natural sector to develop when Israel was founded 64 years ago, since the small stones have been choice merchandise for generations of Jews who had to quickly flee from riots and persecution.

The plan to revitalize manufacturing will cost millions of dollars and the diamond sector, for the first time, is turning to the government for help. The government, eager to get as many ultra-Orthodox working as possible, is on board.

Industry troubles
The global financial crisis has taken a toll on the diamond trade, and Israel was not spared. Turnover was nearly halved at the outset in 2009, though in 2011 it returned to pre-crisis levels. A smaller drop is again expected for 2012.


The damage has been moderate compared to other major hubs such as India, according to Yair Sahar, president of the Israel Diamond Exchange.

"In other centers the leverage was tremendous, as opposed to here where we were much more conservative," he said, referring to the low level of debt among Israeli firms. "We entered the crisis more prepared, so to speak."

There have, however, been other problems.

The price for raw material has risen faster than that of the final product, eating away at profits. And a money laundering and tax evasion scandal at the start of 2012 scared away some customers. The investigations have ended and, so far, no one has been charged.

The diamond trading floor in Ramat Gan, a suburb of Tel Aviv, is the biggest in the world. Armed guards escort non-members and on one wall are mug shots of problematic dealers whom customers are urged to avoid.

Diamonds change hands freely across the rows of long dark tables that line the hall. On one side a seller could be local. A buyer across the way could represent some anonymous client on a different continent.

They scrutinize the stones under a magnifying glass, weigh them on sensitive scales and when a deal is reached they say "mazal ubracha", a Hebrew phrase recognized in centers around the world meaning "luck and blessings".

In 2011, rough diamond imports to Israel topped $4.4 billion and $7.2 billion in polished diamonds were exported. Every second diamond sold in the United States, according to value, came from Israel.

But only $1.5 billion of the stones were cut and polished locally, a much lower percentage than a decade ago. The rest were sent abroad to foreign firms or Israeli-owned factories.

"Once, everyone who sat in this room was a manufacturer," billionaire dealer Lev Leviev said at the opening of a Gemological Institute of America (GIA) laboratory in September. "There was not a diamantaire who was not a manufacturer, and over the years we lost it."

Salaries were just too cheap to compete with, he said, first in India, the world's biggest importer of rough diamonds, and later in China.

Israel has subsisted on larger, high-end stones whose owners pay more to have them manufactured close to home. But industry leaders hope to change that, in part because polishers in developing countries are demanding more money.

"I think we are there, more or less. With rocks of one carat plus, I think we are in a place where the (wage) gap doesn't justify running to manufacture abroad," said Sahar.

The GIA decision to open its lab in Israel was a first step. Manufacturers can now have their diamonds graded and evaluated in Israel rather than sending them to the United States.

"It's critical for the growth, for the international branding of the export business, and we think that we're a good partner to help the manufacturing grow," GIA President and CEO Donna Baker told Reuters when the lab opened.

By cutting costs and allowing increased turnover, it will add between $30 million and $50 million a year to the industry.

New blood
At the peak of manufacturing in the 1980s, there were 20,000 people cutting and polishing diamonds in Israel. That has dropped to about 2,000.


"There is no new manpower. Most polishers are 50 years old and up," said Roy Fuchs, who owns a factory a few minutes walk from the exchange. "If they don't invest and bring in new blood, there simply won't be manufacturing."

To make it happen, the industry realizes it needs help, and for the first time, it is looking for assistance.

"It's not easy. You need cooperation with the government," said Udi Sheintal, the Israel Diamond Institute's managing director. "Here in the middle of Ramat Gan, you don't get incentives. There are only incentives for certain populations, like the haredi."

The term haredi, which in Hebrew means "those who tremble before God", refers to people who strictly observe Jewish law. They dress in traditional black outfits, the men do not shave their beards and they spend their days in study and prayer.

Some 8-10 percent of Israelis are haredi. For the most part they live in insular communities, are exempt from mandatory military service and, according to the Bank of Israel, less than half of ultra-Orthodox men work.

The issue has created a rift in the mostly secular Israeli society and put a strain on an otherwise robust economy. The government has already earmarked $200 million over the next five years to encourage haredi integration in the work force.

Many in the new generation of ultra-Orthodox are open to the idea of getting jobs. The key is finding one that fits, said Bezalel Cohen, 38, who has worked for years to promote employment among his fellow haredis.

"The diamond industry's initiative (to hire ultra-Orthodox)has potential to really succeed," he said. "As long as the pay and training is proper, it should take off."

Aside from helping to pay the salaries for newly hired haredis, the government will offer grants to small exporters and marketing support.

Employment plan
The Trade Ministry's diamond controller, Shmuel Mordechai, said the government backs the idea and has funded similar programs in other financial sectors. It would have helped even earlier, he said, but the diamond industry was never interested.


"They lived in their bubble, they said, 'Don't bother us, don't help us'. In recent years, because of difficulties in the industry and because we opened up our tools to them, they understand," he said.

One of the more advanced plans Mordechai described is that of an independent service plant where dealers bring their rough diamonds. Such a plant would cost $1-$2 million and employ 30-40 workers. The government will help recruit the ultra-Orthodox.

"In any plant they set up here and bring employment, we will give help with salaries and other incentives," he said. "If two or three are set up, it will catch on. If the first one succeeds, others will follow."

Traub, from the manufacturer's association, intends to create dozens of new private factories. He has already spoken to leading rabbis in the community to win their support.

"I'm speaking of starting with hundreds and going to thousands of haredi workers," he said. "Manufacturing attracts clients. Barring a global crisis, I think we will grow at least 10 percent a year in export."

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