Negotiating with Original Creditors
Last Modified June 16, 2009
Your account is with the Original Creditor if it is still with the credit card company. The negotiating tactics are quite different than a collection agency.
Definition of Original Creditor
Your account is still with the original creditor if all of the following are true:
- If your credit card accounts have not gone to collection
- you are no more than 150 days late on your payments
- the credit card company is still managing your account
As stated above, your negotiating tactics are quite different than those dealing with the collection agencies.
- how you pay them
- if you need to get agreements in writing
- contacting them
- negotiating your credit rating.
If you are intimidated by the prospect of calling a credit card company, you could try Consumer Credit Counseling Services. Settling your debts is a time consuming ordeal many people find iconfusing and as a result leave it to CCCS, but you will most likely get a better deal if you handle things yourself. CCCS's main goal is a worthy one, but they often do not negotiate on how the account will be reported, which could leave you debt free, but with a ruined credit report.
How do you know your account is still with the credit card company?
Easy. Just call them. Unlike all of my advice on how you should never call a collection agency, calling the original creditor is just fine and is actually the best way to get things accomplished. If you account is still with them, they will start dealing with you. Otherwise, they will just refer you to the collection agency to whom they have turned the account over. As a matter of fact, they will refuse to talk to you at all if your account is in collection.
If you can avoid your account going into collection, by all means do so.
Dealing with collection agencies are a headache and then you will have to worry about two negative marks on your credit. To make sure your account doesn't go into collection, don't let your payment get more than 90 days down. American Express will typically send your account to collection after 90 days. With everyone else, you are in dangerous waters after 120 days.
Why would the creditor settle with you?
Most credit card companies are not willing to talk to consumers until they are 60-90 days down.
If you think about it, it makes sense - why would they offer to just let half of the debt go if you are current on your payments? Also, if you are current on everyone but the creditor you are trying to settle with, they are not going to be willing to reduce your debt. If they see (by looking at your credit report, which is legal) that you are paying everyone else but them, they are going to feel slighted. OK, this isn't quite true - but they will feel that since you are able to pay everyone else, you really do have the ability to pay them.
Update June 16, 2009: With the current economy, more and more credit card companies are willing to take 35%-50% of the balance as payment in full. I've had some people tell me the credit card companies have called THEM with offers below 50%. If you don't have lump sum cash, some lenders are willing to spread out the payments over several months. Just don't look for a payment spread out over more than 6 months. All the more reason NOT to hire a debt settlement company.
Other reasons they would settle:
- If he believes it is in his best interest (you have convinced him that this is his only chance to receive anything.)
- If he doesn't think that you have many assets (if he does sue, he won't be able to collect anything from you even if he wins.)
So what does this say? If you've been paying on time and all of the sudden call up the credit card company and tell them you can't pay, they are going to be suspicious and less likely to make a deal. But don't stop paying your bills just to try and convince them to settle. Have an honest conversation with them first.
You don't need anything in writing from the original creditors in order to accept a deal.
As a matter of fact, they will refuse to give you anything in writing. That's ok.
You might want to record the conversation - if you are not in a two party state, then you must inform them you are recording the conversation. What's a two party state? It means that in some states, only one party on the telephone needs to give permission to have the conversation recorded - and that one party can be you. For the list of states, exact federal regulations, etc., here is an excellent reference.
Also, I would keep a careful record log of your phone calls, who you talked to, etc. Just a file or notebook containing all of your notes is just fine.
Paying by checks over the phone, credit cards (I know this sounds crazy) is fine.
I'd still pay with a cashier's check or money order, but I don't really see a problem if they insist on taking payment over the phone. Credit card companies are highly regulated, much more so than the collection agencies, and they are, as a result, much more ethical.
If you pay in full, you can get a "Paid as Agreed" rating, otherwise, "Settled" is the best you can do.
In recent years, the credit card companies have adopted a immovable stance on your account rating if you settle for less than is owed. They will agree to list your account as "Settled", but that's it. You can always try to get a better rating, but I doubt if you are going to have much luck. Remember, "Settled" is better than "charged off".
Do you have a question you feel we haven't answered?
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