Question about credit and debts...

[Gurm]

So let's just say that a hypothetical person - let's call him Trent - ran up a credit card debt a number of years back. Let's say, just to use a round number, that the debt was $400. Not earth-shattering.

Now let's say that the credit card company, instead of accepting any reasonable payment terms, charged off the account - at $1500. Pretty rude, huh?

Now, let's say further that some OTHER company had recently - at the far extreme of the 6 year limit on debts - picked up the debt, and entered a NEW entry into Trent's credit report claiming that they are owed $2300 for this debt... IS THAT LEGAL?

The first that Trent found out about it - beyond owing the original $400 - was a letter from a lawyer (well known locally to just be a debt collection front) saying that they wanted the $2300 PLUS another $250 for their trouble, bringing Trent's "running total" to $2550. For a $400 debt.

Can they DO that? Can one company to whom you have never owed money open a new debt in your name owed to THEM, in order to get around the fact that old debts fall off your credit report after 6 years?

[Jon P. Inghram]

I'd check up on the collection laws of the state that "Trent" is in (or where the debts were originally on, not sure how that works) but just off the top of my head I'd say it's utter BS. Look up Collection agencies on Wikipedia. Apparently I've had really good luck with my few dealings with collections agencies, they've always been polite and even nice!

[schmosef]

contact the admins at consumerist.com.

they deal with this type of stuff all the time and can give you, er... i mean trent, some good advice.

[Umfriend]

Normally (but I am talking European countries' laws here) debts can be transferred (or actually the other way around; claims against Trent can be transferred), so that is OK. However, such transfer may not cause the position of Trent to deteriorate. So if the new owner claims expenses etc, then those expenses would have to be claimable under the initial contract or statutory law. If a debt becomes void and nullable after a certain period after it arises, then that is a property of that claim and can not be seperated from it by transferring the claim. In short, if the original company could have done this then, yes, the new one should be able to as well. If not then not.

[rylan]

Look into the consumer protection groups... this state doesn't let credit debt collectors pull crap like that and get away with it if you start raising flags.
Just make sure you don't pay them a thing... if you do it will technically be an acknowledgement of the debt and reset the 6 year statute.

And no, they can't out of the blue send you a letter asking for more money. What I'd do is send a registered letter in return asking for an itimized list of what is owed and from when. They can't throw on extra money and then contact you.
If you want to go after them, send a copy of the notice they sent you along with your registered letter to the state attorney consumer rights office and other consumer rights groups, and also state that you're going to sue them for putting crap on your credit report.

[Gurm]

Ohhhh well.

They've whipped out the big guns.

A fellow knocked on my door today and handed me a sheaf of papers, the top of which is a "summons to respond" or else they might take me to court.

Interesting items:

1. It's poorly filled out. The box that says "sign and initial and date INSIDE THE BOX" (their emphasis)? Empty. The stamp and date and scribble is in the white space nearby. No signatures on the signatory lines. All photostatted.

But I guess I have to actually deal with this now, or else they'll proceed with a civil action. I note that they have changed the facts around to suit them - they claim that I owe $2000 in principle and interest (despite the account charging off at $1500), and claim that the $2000 balance was incurred as of 2004 and want interest since 2004.

So... Consumerist, you say? We can hardly afford legal services...

[TransformX]

Ohhhh well.

They've whipped out the big guns.

A fellow knocked on my door today and handed me a sheaf of papers, the top of which is a "summons to respond" or else they might take me to court.

Interesting items:

1. It's poorly filled out. The box that says "sign and initial and date INSIDE THE BOX" (their emphasis)? Empty. The stamp and date and scribble is in the white space nearby. No signatures on the signatory lines. All photostatted.

But I guess I have to actually deal with this now, or else they'll proceed with a civil action. I note that they have changed the facts around to suit them - they claim that I owe $2000 in principle and interest (despite the account charging off at $1500), and claim that the $2000 balance was incurred as of 2004 and want interest since 2004.

So... Consumerist, you say? We can hardly afford legal services...

A good lawyer can end it by you paying $400 + interest and some fees, but them paying all court expenses and some penalties for all the pseudo-legal stuff they tried to pool. You won't have to pay the lawyer a dime and you might even walk away with some cash.
Don't be surprised if the lawyer makes you sign a receipt of something like $4000 or more in advance just so he could later collect it from these pricks as part of the court expenses they dragged you into. I know it works here sometimes.

[Helevitia]

Gurm, unfortunately yes They do this all the time. This is there way of getting aroudn the 7 year limit imposed.

Let me tell you though, you can work with them and get the amount reduced. Start first by saying you can't afford it. Ask them to reduce the amount(they can and will). Offer them minimal monthly payments and ask them not to acrue anymore interest. They can do whatever they want. It is up to you to negotiate with them. Keep chipping at them and they will continue to lower the amount. It's hard to say by how much, but could probably be up to half.

Another quick way to get them to lower the amount is to say you have $XXX to pay and you will pay it in full if they lower the price substantially. I've done that before on a $3500 debt that I co-signed with my sister. She basically caused $3500 in damages and back rent pay. I talked them down to $2500 but I had to pay in full right then and there. I did so with another credit card. Just keep telling them you have no money.

Anyway, just some options to think about.

[Helevitia]

http://www.cardreport.com/credit-problems/collection-faq.html

[Umfriend]

Wow, that is a site that actually makes the Internet worth while. Thanks Al!

I would be wondering about two things given what I know so far on this:
1. How did $400 become $1500, was that in compliance with the loan agreement; and,
2. Do I have an asset and/or income base that would cause the collector to asses my case as worthwhile persuning (as in going to court).

If the answers to 1&2 are affirmative then Helevitia's advice may well be sound. If #2 is negative, than sending a cease and desist letter might be a good idea. If #1 is no then I do not know, I'd probably send them a letter stating the claim is invalid anyway.

In any case, as I understand it, do NOT make a partial payment NOR promise to pay anything or do anything to partially satisfy your alleged obligation until you are entirely sure what it is you are going to have to pay ultimately and you are fine with that.

[Gurm]

Well, the $400->$1500 is pretty much in line with the usurious rates credit card companies in the USA charge if you miss payments. I was unemployed at the time with no way of meeting the obligation, and rather than close the account and stop accruing (my request) they kept it open and kept piling on fee after fee after fee. That nice low-rate card becomes a high-rate card if you miss payments, it's in the fine print. So at 20+% plus late fees? $30 a month for late fees isn't unheard-of. So 6 months of ridiculous interest plus late fees ... yes, can bump a card up that high.

I have NO assets for them to go after, however I am working now. I'm sure that out of context our combined monthly income looks pretty hefty, too. Of course IN-CONTEXT any fool would realize that in order for both of us to be working, we have to pay $2000 a month for daycare and that our rent/utilities/groceries are expensive too. Add in the cost of gas because I drive all over for work, and we're still scraping by each month. It sucks. But of course all the vultures see is the gross number, and say "hell yeah he can pay!"

As for the tacking on of an extra $500-$1000? No idea how legitimate that is. They'll claim it's more interest, and fees.

But I have also read that it is bad to pay on a debt you are contesting, because ANY payment is the same as acknowledgement. In fact, I've read that any CORRESPONDENCE, other than a firmly worded "I don't believe I really owe this" notice, can be taken as acceptance of the debt! I'm sending out a notarized letter today or tomorrow to them (and the duly appointed court magistrate's clerk or whatever) saying exactly that... that I dispute the claim, don't owe the money, haven't heard about it previously, haven't been dealt with in good faith, and expect them to cease all collection activity immediately until they can prove legally that I really do owe that much money and provide full documentation thereof.

The "whining them down to 50%" option is always available, but I will reserve it for a last resort.

[Gurm]

Another interesting item of note is that I'm almost positive that this is the same group (or related to them) that called me up a few months back pretending to have a package to deliver in order to pump me for information about my address and place of employment.

[Umfriend]

But I have also read that it is bad to pay on a debt you are contesting, because ANY payment is the same as acknowledgement. In fact, I've read that any CORRESPONDENCE, other than a firmly worded "I don't believe I really owe this" notice, can be taken as acceptance of the debt! I'm sending out a notarized letter today or tomorrow to them (and the duly appointed court magistrate's clerk or whatever) saying exactly that... that I dispute the claim, don't owe the money, haven't heard about it previously, haven't been dealt with in good faith, and expect them to cease all collection activity immediately until they can prove legally that I really do owe that much money and provide full documentation thereof.

I think it is somewhat different here (in the Netherlands) but as I understand US law and standard practise, that might well be the way to go. I don't think they can force you to disclose anything wrt wealth and/or income unless they get a court order. It might be worthwhile then. I get the impression that if you're just convincingly enough to pass as a poor sob you might get away with it. Not that it would not affect your credit-scoring mind you.

One thing to consider: a notarised letter with the eloquence you posses? I'm not sure that'd help convince them you're an (the? ) undereducated slob you're going to pretend to be. Might a handwritten letter with plain English, a few spelling errors, some smudges (pizza anyone?) not be a better idea?

The only thing I can think of, and I may be wrong here, that could put you at additional risk is if they are allowed to add expenses for collecting if the process takes longer or if they start taking steps to actually take you to court. Over here you might easily get into a penny-wise, pound-foolish scenario...

Wonder how it goes, would like to read an update occasionally.

[Gurm]

I think it is somewhat different here (in the Netherlands) but as I understand US law and standard practise, that might well be the way to go. I don't think they can force you to disclose anything wrt wealth and/or income unless they get a court order. It might be worthwhile then. I get the impression that if you're just convincingly enough to pass as a poor sob you might get away with it. Not that it would not affect your credit-scoring mind you.

One thing to consider: a notarised letter with the eloquence you posses? I'm not sure that'd help convince them you're an (the? ) undereducated slob you're going to pretend to be. Might a handwritten letter with plain English, a few spelling errors, some smudges (pizza anyone?) not be a better idea?

The only thing I can think of, and I may be wrong here, that could put you at additional risk is if they are allowed to add expenses for collecting if the process takes longer or if they start taking steps to actually take you to court. Over here you might easily get into a penny-wise, pound-foolish scenario...

Wonder how it goes, would like to read an update occasionally.

You have a valid point, however at this time I have a... shabby, but semi-official-looking... summons to provide a response. I guess I could provide a STUPID response, but...

[Umfriend]

So you intend to show them you are better by sending a neat official reply? You are a consumer, you do not have to meet their standards, lowly as they may turn out to be. If I were a collector and you'd send me notarised mail, you'd make top on my 'likely to collect' list. It must not be a stupid reply, it must be a reply that could make people think _you_ are stupid and, more importantly, hopelessly poor.

Rereading your post, the fact that they charged off your debt at $1,500 does not mean their cliam is capped at that, not at all. It just means that at that point they deemed the claim worthless which is not at all the same as void. The claim continues to accrue interest, fees, commisions and whatnot, it just won;t get to their P&L.

Oh, and BTW, read this disclaimer: I am an ignorant prick who does not know anything about these kind of things, expecially not in the USA context. You may do well to seek professional advice on this.