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Can collectors charge interest on debts & Is this settlement agreement authorized?


confuseddebtor
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The original creditor charged off my account Summer 2002. The last time I heard from them, the debt was $7399 in 2004. The OC sold the account to a collection agency Summer 2006 with the same balance of $7399.

NOTE: This debt is a personal loan from a financial institution, which has a written contract. It is not a credit card.

Immediately the collector increased the balance to over $11,000 and told me it was due to interest and fees. Each month the amount continues to increase. Is it legal for collectors to charge interest on accounts after receiving them, and what would be the maximum allowed?

Also, I was offered a settlement agreement of $7300 and told I could pay $50 per month over the next 12 years, and that a 1099 form would not be submitted since I was making monthly payments on the debt. Supposedly, a 1099 form is only required when making a lump sum settlement payment according to the collector. Is this true?

I received all the above in writing, but how can I be sure this agreement was approved, and later the collection office will not tell me the person who wrote the letter was not authorized to do so? Who should I ask sign the letter, if the signature of the collector I've been speaking at the office is not sufficient?

Note: The letter is on their company letterhead, and has an actual pen signature.

Also, the letter mentions that a 1099 form will not be submitted, but does not say 1099c. Does it make a difference that the "c" was left off? I'm currently insolvent due to unemployment caused by illness, have no assets, and my only source of income is SSI. Thanks(from Illinois)

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Generally they may charge interest, but they may charge no more than your state's max interest rate. Most credit cards are under an exception in interest rates in South Dakota.

Hi Direred!! Thank you for responding to my message. Would you happen to know how much interest that would be in Illinois, and whether it would be added monthly or yearly? I've noticed the amount increases each month?

Also, if anyone has advice concerning the settlement agreement mentioned in my previous post I would be most appreciative. So many questions, so little time. :)

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Honestly, I tried to find the interest rate and gave up.

The whole 1099 thing is fairly new -- even the ACA (the collector's industry association is up in arms about it. The ACA tried to sue in federal court over the FDCPA implications of 1099-C reporting, but the suit was dismissed (as I recall).

Honestly, since I haven't had any CAs or JDBs to deal with in a while, it hasn't been an issue for me so I haven't kept on top of that.

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The ACA tried to sue in federal court over the FDCPA implications of 1099-C reporting, but the suit was dismissed (as I recall).

Actually, it was the Debt Buyers Association that sued the Treasury Dept when the IRS clarified their definition of a creditor to include a debt buyer for purposes of issuing a 1099.

You would owe taxes on the difference between what was owed and the settlement amount, unless you were insolvent prior to the settlement agreement. Irrespective of whether they issue a 1099 or not. Their agreement with you is not binding on the IRS.

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BTW, the Treasury Dept prevailed in the case.

I'm surprised more people don't use that case to support demanding a calculation of the total debt claimed by a JDB.

One of the Debt Buyers Association's (which most JDB's belong to) positions in the case as to why they should not be required to report to the IRS was, and I'm paraphrasing:

"We would risk running afoul of the IRS. Because our members rarely have documentation or media to accurately support the total amount claimed as due, our members would not be able to issue an accurate 1099c."

Ok if they run afoul of the consumer though xdancex

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Based on your comments, I think filing BK7 is the option here. You definitely should qualify for it having only SSI as income. Instead of locking into some payment plan and having to worry about being sued down the road, just eliminate everything you owe now.

I think that's your best option.

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Actually, it was the Debt Buyers Association that sued the Treasury Dept when the IRS clarified their definition of a creditor to include a debt buyer for purposes of issuing a 1099.

That would explain why I couldn't find it searching the ACA's site or under ACA on Google. I knew it was an industry association, I just misremembered which.

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Hypothetical.

Debt charges off. OC stops charging interest. 2 years later, they sell to a JDB. JDB tries to add in 2 years of interest at a contractual rate and files suit. Can you claim waiver/estoppel as a defense to their adding retroactive interest?

In your hypothetical, I think the JDB can only add legally-permissible interest after the point of sale, as the OC and JDB agreed upon both a sale rate and an amount owing at time of sale.

So yes, I do believe so.

Maybe unjust enrichment?

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Hi everyone!! Thanks for the replies. Although, I'm still not sure of the correct answers to my questions. :)

My goal is not to file bankruptcy for debt under $12,000, especially if the agreement is legitimate and I can settle the debt for $7300 by paying it off at $50 per month over the next 12 years.

The collector has also mentioned, that further settlement offers will be offered in the future if my situation improves and/or after I've made at least one year of timely payments. That means, I may be able to pay less than $7300 if I return to work.

Also, the first day of delinquency on my report is Summer 2002(when I made my last payment), so I'm hoping the history from the original creditor and this collector will be removed in 2009. I have not signed anything, but the collector has sent me a signed letter concerning the agreement as mentioned in my previous message.

If anyone has further answers, or has been in this situation, I'd love to hear from you. I'm especially interested in answers concerning the interest, and whether or not the letter I received signed by the collector I spoke with is enough, or if I should request someone else in the office sign the letter. Thanks

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Based on your comments, I think filing BK7 is the option here. You definitely should qualify for it having only SSI as income. Instead of locking into some payment plan and having to worry about being sued down the road, just eliminate everything you owe now.

I think that's your best option.

I considered Bankruptcy, but that seemed a bit drastic for the amount of my debt, and the possibility that I may return to work. That's why I'm more concerned if this agreement is "binding". If so, I'd prefer to go this route.

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In your hypothetical, I think the JDB can only add legally-permissible interest after the point of sale, as the OC and JDB agreed upon both a sale rate and an amount owing at time of sale.

So yes, I do believe so.

Maybe unjust enrichment?

Can someone provide legal verification concerning how much interest a JDB can add after receiving a charged or written off debt? I'd like to have something concrete before I decide whether or not to send in my first payment and finalze the agreement. Is there a website that lists specific laws about this? I've googled everything and found nothing. I'm from Illinois.

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Normis can you elaborate? What do you mean the collector has "lied" to me? I have not determined if I've been told anything dishonest as of yet, which is why I've asked questions here on the board.
Supposedly, a 1099 form is only required when making a lump sum settlement payment according to the collector.

Perhaps it's not a lie, merely ignorance. Anyway it's false thereby making it a FDCPA violation.

What makes you so sure the collector has the authority to bind the corporation to the agreement? Just because I install lug nuts at GM doesn't give me the authority to give you a free car every year.

The collector won't be there a year from now. How do you plan on enforcing any agreement?

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Yes. In Georgia, the SOL of the reaffirmed contract is equivalent to the contract the reaffirmation is based on. A written reaffirmation of a open contract debt gets an open SOL, not written.

Hi IhateCAs!! In my situation, this was originally a revolving line of credit(open account). However, I made the mistake of refinancing the debt when I fell behind in payments, so I signed new paperwork(2002), and I was told it then become an installment written agreement with an SOL of 10 years. Does this have anything to do with what you've stated about reaffirming an open contract? I'm not sure I understand.

Had I known this I would have never signed the paperwork, and the SOL would have only been 5 years(which would have ended this summer). Though I'm sure I would have been sued for the debt by then. lol Currently the collector still has 5 years left to sue me for this debt. I suppose their gambling on the hope, that I can pay off the debt before then(although they're giving me 12 years), which will ultimately save them time and money. Afterall, I'm sure they purchased the account for much less. Thanks

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Perhaps it's not a lie, merely ignorance. Anyway it's false thereby making it a FDCPA violation.

What makes you so sure the collector has the authority to bind the corporation to the agreement? Just because I install lug nuts at GM doesn't give me the authority to give you a free car every year.

The collector won't be there a year from now. How do you plan on enforcing any agreement?

Normis I'm sorry, but I'm not sure I follow you. I've asked if the settlement agreement is legitimate if it is in writing. You stated that any agreement the collector made with me is a "lie". So are you saying a collector can NOT make this type of agreement legally? If so, can you please refer me to legal reasons why this is true, otherwise it's no more than opinion and I can't make a decision based on opinions. I honestly want to understand your reasons behind this, so that I can make a firm decision in confidence. Thanks

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You're right. Please disregard.

Normis does this mean when you stated written agreements by collectors are "false thereby making it a FDCPA violation", were you not being honest? This is all very confusing to me , and offering comments as "fact" then later admitting they were only your opinions, only adds to the confusion. *sigh*

NOTE: I don't mind opinions, but it's very misleading to imply you've verified the legal basis of something with FDCPA, when you really have not. As consumers we have to work together on this board. We have enough to worry about when it comes to implications and misleading information with collectors.

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Please don't buy into any stigmas or stereotypes about filing BK. You want to enter into an agreement when you can pay off a debt over 12 years. Who knows what can happen between now and then? You'd be creating a new point of departure for SOL on a debt that is already or may be passed SOL (depends on how that Rawson v Credigy suit ends up). Don't do it to yourself.

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