Sold Debt/Write-off Amount?

[Anonymous]

I have a question about something that has been bothering me. When a credit card company, for example, sells a debt to a collection agency, the cc company receives money in exchange for the debt, does it not?

Why isn't this money deducted from the total that the cc company claims to have written off? They have received funds for the purpose of partially compensating them for the bad debt - it seems to me they should be required to deduct this 'payment' from the total amount owed; otherwise, they could actually make a profit from defaulted accounts.

Can anyone here explain this for me?

[LadynRed]

Nope, not gonna happen. They are not going to reduce YOUR debt to them by selling the account to a CA - that goes into their operating expenses till I'm sure.

Not only do they get money for the sale of the debt (at a reduced percantage of the actual debt), they get a tax write-off when they charge-off the debt !

[Anonymous]

Yikes! I didn't think to check the e-mail notification and lost track of how long it had been since I posted this. Sorry!

That's pretty much what I thought, LadynRed - it sure is a sweet deal for them. It sure as heck doesn't seem fair!

What makes me really furious is that three of the credit card companies that helped me ruin my credit were the three that were nailed for illegal and fraudulent practices. (Does Providian ring a bell for anyone?) I was included in the class action suits and actually received a settlement in all three cases - but of course by the time the money was parceled out, the largest check I received was for $1.38. Yet I was run deeply into debt by their practices of marking payments late no matter when they arrived, followed by adding late and other charges and enormous unannounced interest hikes.

A representative from one of these companies that I spoke to about this actually told me it could take up to a MONTH to post a payment received - a ridiculous bald-faced lie which, even if true, wasn't MY problem.

I did finally put a stop to that one by sending all of my payments by certified mail, but I could never dig myself out of the hole they put me in.

And I never applied for a single credit card - they were all sent pre-approved through the mail, often along with the scam of offering to transfer the balance of another card, then paying only a token amount on the previous debt, leaving me with TWO large debts where I only had one before. Unfortunately I was so naive I mishandled everything, and didn't learn about these and other scams until it was too late.

Older and wiser now, but considerably poorer!

[IronMan]

Easy defense to that. They have to prove you were late. Ask them to send your postmarked payment envelope back to you to prove you were late! If they don't have it, they don't have proof that you were! Not your fault it takes them 5-7 days to post to your account because of their internal processes.

At that point you demand that they remove the late fees.

If they try to say that you must send in payment 5-7 days earlier than your due date coupled with they'll remove it "this one time", tell them that they're liable for misrepresenting the due date on your statement.

Dispute the disparages on your credit report too.

If CCC won't do it, then work the CRA's. This works as long as you've got 1 or 2 30-60 days on your otherwise perfect payment schedule. Tell CRA's that the "subscriber" was unable to send your postmarked envelope to substantiate the reporting of the lates and has not taken any action to correct; ignored your requests, etc. You want to make it sound like you're enlisting the CRA for their assistance in correcting these inaccuracies.

A class action suit against the CCC for this late fee practice could definitely be on order here. I'm sure you're not the only one. Like I said, if you're late a lot, it's hard to push a case.

Cheers!

[Anonymous]

What wonderful advice, Ironman! I had no idea it was possible to demand proof that your payment was late - that's why I started doing the return-receipt mail for my payments.

It's far too late for any of this for me - nearly everything was settled out and charged off, either with the OC or a CA, a couple of years ago. But I didn't realize all of this went on my credit record until recently. Fortunately I discovered this and other very, very helpful sites, and I'm in the process of getting many things corrected and removed. I just finished my first round of disputes with the CRAs and had several things removed - I'm preparing to make the rounds of the OCs and CAs right now to see what I can accomplish there.

Three of the CC companies involved have already settled class action suits based on this and other fraudulent behavior - that's how I learned that the 'late payment' deal was a deliberate action and not due simply to astonishing incompetency. However, this didn't remove the paid charge-offs from my credit report, and I was so disgusted by the piddling 'settlement amount' that I simply threw the paperwork away.

Do you think that if I had saved that paperwork and sent copies to the CRAs it would have led to those accounts being removed? Although I'm not sure that would have helped much - apparently they raised some of the settlement money by selling their outstanding accounts to other companies, who promptly filed their own reports with the CRAs, usually without contacting me to even inquire about my willingness/ability to pay on the account.

That's another thing I think is unfair - these companies were cited, fined, or whatever by the FTC for illegal activities that resulted in unearned and undeserved rate hikes, late charges, etc., yet are still allowed to claim and report those artificially inflated totals as the true balance due.

Those pitiful and useless settlements should have included some sort of reduction in the amounts claimed due. $1.38 is supposed to be sufficient compensation for several thousand dollars illegally added to my legitimate debts and claimed as a charge-off when I refused to pay until an adjustment was made? And for the resulting damage to my credit record?

I wonder if the announcements about those companies are still available in some sort of archive at the FTC website. If I can find them, maybe I should print copies and send to the CRAs along with a letter pointing out that the balances being reported by those companies (and any CA that purchased those debts) are inaccurate because they are artificially and illegally inflated?

I may try that just to see what kind of results I get.

I'm actually beginning to enjoy all of this - it's like some kind of strange game. Is there any way to become some sort of consultant/advisor to assist other people with this sort of thing without getting a law degree? I'd love to do this in my spare time as an unpaid volunteer. I've got an idealistic, help-the-downtrodden streak about a mile wide that would find this a VERY satisfactory hobby.