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Charge Off Date exceeds 180 days!


gcmoore
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I opened a credit card account 2001 and stopped paying on it the same year due to unemployment. My credit report says the current status is: Account charged off/Collection account, $4000 written off, $4,300 past due as of April 2005. Charge off as of April 2005. I thought accounts had to be charged off 180 days after 1st non payment? Why did this one take four years before it was charged off?

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Listing charge off as of April 05 is not an action, but a status. For example, let's say I get divorced in 1998. Someone asks me what my marital status is. I say "Right now, I am divorced" That does not mean I got divorced right now, it means I am divorced right now.

Same here, it doesn't mean the credotpr charged off the account in April 05, but that as of April 05, the account was charged off.

The date you are looking for is the DOFD. Unfortunately, getting EX and TU to give you that date is tough. Call the CRA's and ask them when the TL is due to be removed from your report. That will allow you to figure out the DOFD.

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I thought accounts had to be charged off 180 days after 1st non payment? Why did this one take four years before it was charged off?

Nope...sorry. We have debated this a couple times, and my opinion at least is that CO is only an accounting term. However, its used in several different contexts, and that's where the confusion comes from

For example, there are some FDIC regulations that state that an insurred institution must "charge off" non-performing debts within 180 days in order to keep their insurance. In that context, "charge off" means "write off" and remove from their books. We have yet to establish if the CC issuing arm of an FDIC insurred bank falls under that rule.

There are also some IRS regs that state that relate to CO. In effect, a company is allowed to keep a non-performing account on their books for up to 3 years after their last attempt to collect.

So...IMHO, for CCs, "charge off" occurs when they need a tax break...and has nothing to do with how old the debt is.

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So...IMHO, for CCs, "charge off" occurs when they need a tax break...and has nothing to do with how old the debt is.

And that is the reason why the FCRA was changed in 1996 to require the bureaus to look at the date of the delinquency immediately preceding the charge-off for starting the 7 year clock. In doing so, Congress intended a date definate for removal of bad items regardless of when a creditor charges an account off.

BTW. The OCC also has regulations on when credit cards are to be charged off and it is 180 days. The OCC regulates (when they feel like it) most credit card companies.

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Okay, here's some interesting reading...

http://www.occ.gov/handbook/credit.pdf

I found the definition for "CEBA Bank" particularly interesting...its a bank formed for the express purpose of issuing credit cards...and may be owned by a non-bank holding company, which would mean its not really subject to the "national bank" regulations because its not really FDIC insurred.

The booklet also implies that its talking about "auditing guidelines", not laws, and kinda falls back on the "as long as they have procedures in place to protect against" stuff, they're okay.

I'll keep looking...

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And yet another...

http://www.occ.gov/fr/fedregister/64fr6655.htm

...which includes this paragraph...

1a. Charge-off Policy for Open-End and Closed-End Credit. The 1998

Notice proposed two options for charging off delinquent accounts. The

first proposed that both closed-end and open-end credit be charged off

at 150 days delinquency. The second option proposed to retain, but

clarify existing policy; charge off closed-end credit at 120 days

delinquency and charge off open-end credit at 180 days delinquency.

Commenters were overwhelmingly in favor of retaining the existing 120/

180 charge-off time frames. Commenters representing the credit card

industry stated that shortening time frames to 150 days would cause a

$2 billion dollar write-off initially, with further impact during

implementation. Moreover, credit card companies and community groups

and counseling services stated that they needed those extra 30 days in

the period from 150 days delinquency to 180 days delinquency to work

with troubled borrowers. Several lenders indicated that they can

collect ten percent or more of accounts during that time period. After

careful consideration, the FFIEC has decided not to pursue uniform

charge-off time frames for open-end and closed-end credit at this time.

Moreover, since the revision to the 1980 policy was initiated, the

majority of institutions whose open-end charge-off policy exceeded 180

days have brought themselves into compliance. However, because of

confusion over the terminology of ``seven zero billing cycles,'' the

FFIEC decided to eliminate that language in the final policy.

Additionally, the FFIEC is adopting re-aging guidance so that greater

consistency and clarity in reporting among retail credit lenders will

be achieved.

So...I'm sticking with my statement that we've yet to establish whether the credit card issuing arms of national banks are in any way governed by the OCC, FDIC, or UCC regulations (at least with regards to "charge off" becoming "write off").

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http://www.ffiec.gov/ffiecinfobase/resources/retail/occ-bl2000-20_ffiec_uniform_retail_credit_class.pdf

Page 5, par 2.

Apparently it is in a law. The Riegle Community Development and Regulatory Improvement Act of 1994, section 303(a) instructed all the bank agencies to adopt uniform guidelines for accounting. The link above is the most recent set of rules (in the form of an OCC practice memo in 2000) all financial institutions must follow regarding chargeoffs and other accounting/soundness practices.

Note it specifically defines that chargeoffs must be done on open-ended accounts no later than 180 days, but that institutions can do so sooner if they like.

It also defines what re-aging is and when/how often an institution is allowed to use it.

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Love it!! Dueling federal register sites! No wonder everyones confused...

Okay...so here's the thing. CC's do not uniformly charge off delinquent accounts at 180 days. Therefore, either they're all breaking a law...or they know something we haven't found yet.

If I had any delinquent CC's right now (actually, I don't have any CC's right now), I might be tempted to write them a letter demanding they charge off per regulation whatever and issue me my 1099c for the forgiven debt...and then take them to court if it didn't happen.

However, I got to beleive that these people have set up their holding companies, and credit card issuing banks, so that they're not governed by the same regulations as the FDIC insurred banks that the UCC and the OCC governs.

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So what about the fact that there is apparently 1994 law directing all the federal regulators to adopt uniform rules for accounting for all financial institutions to follow?

I tend to lean more toward banks not following the regs**; especially those under the OCC. The OCC doesn't have a very good record of enforcing the regs it issues ya know. Took them years to come down on Providian for accounting mischief and only after the California AG started sniffing around.

** I can say this because I spent 5 years working as the manager of a bank law department. I saw them break the rules (or simply make sh*t up) daily.

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Almost, but it isn't a requirement. There are plenty of successful people that don't have to fling daggers at others to do so.

Case in point, my wife's father is a millionaire. All it took for him was one smart decision. He bought a large house in downtown Chicago 40 years ago for $20k, paid it off, and never touched the equity. The house is now worth over 2 mil. He's never had to be an a$$ and you'd never know he was a millionaire. He drives an old Toyota microvan that has more rust on it than paint and shops for his groceries at Aldi's.

(and nooo, my wife and I are not privy to that equity. We stand on our own two feet -- and occasionally fall over.)

Makes you wonder if anyone can be a successful business person without also being skilled at deceit. You almost have to be cut throat to be on the top in this world.
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Almost, but it isn't a requirement. There are plenty of successful people that don't have to fling daggers at others to do so.

Case in point, my wife's father is a millionaire. All it took for him was one smart decision. He bought a large house in downtown Chicago 40 years ago for $20k, paid it off, and never touched the equity. The house is now worth over 2 mil. He's never had to be an a$$ and you'd never know he was a millionaire. He drives an old Toyota microvan that has more rust on it than paint and shops for his groceries at Aldi's.

(and nooo, my wife and I are not privy to that equity. we stand on our own two feet.)

Good for him!! Smart man! But I'm talking about people who do lots of business with multiple people. You know the trumps, ect. I could be wrong. There has to be some exceptions but I bet not many. Wish I could find a deal like your father in law. :)

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Well I can tell you some businesses, like property investment, take some steel balls to participate in. Every businessman needs to treat business as such because there are people out there that will take advantage if you are too nice. A landlord has to kick out tennants that don't pay their rent, even in the middle of winter. A retail shop owner has to have shoplifters arrested for stealing even if they took that candybar because they can't afford it. Being in business for yourself isn't for everyone that's for sure and luck does have a lot to do with it. Hell, Donald Trump went through 2 bankruptcies himself, so no one is perfect.

Good for him!! Smart man! But I'm talking about people who do lots of business with multiple people. You know the trumps, ect. I could be wrong. There has to be some exceptions but I bet not many. Wish I could find a deal like your father in law. :)
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Well I can tell you some businesses, like property investment, take some steel balls to participate in. Every businessman needs to treat business as such because there are people out there that will take advantage if you are too nice. A landlord has to kick out tennants that don't pay their rent, even in the middle of winter. A retail shop owner has to have shoplifters arrested for stealing even if they took that candybar because they can't afford it. Being in business for yourself isn't for everyone that's for sure and luck does have a lot to do with it. Hell, Donald Trump went through 2 bankruptcies himself, so no one is perfect.

I thought Trump had bankruptcies too. But last week when he and Rosie were bickering on tv, and she teased him for filing BK, he called her a liar and said he never filed. Landlords can be viscious too. I understand they have to have tough skins, but some are ruthless and those are the one's who usually do the best.

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He did not file personally, but the company he was 99% owner of did... twice. Both under chapter 11. So he's just splitting hairs.

His smart move: Keeping his personal finances and business finances separate so if his business files BK, his personal cash is insulated. Of course I'm sure his business side is what pays for most of his luxuries plus the rather large executive salary he gives himself from the business end of things.

He's different from others like Bill Gates and Steve Jobs. Both of those two owe most of their wealth to stock options and shares. (Steve Jobs' salary last year was just a dollar) If their businesses file for bankruptcy all their personal wealth goes bye bye. Trump, wisely, keeps his personal finances totally apart from his business ventures, which is why he's like some sort of financial roach...keep stomping and he just keeps coming back.

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He did not file personally, but the company he was 99% owner of did... twice. Both under chapter 11. So he's just splitting hairs.

His smart move: Keeping his personal finances and business finances separate so if his business files BK, his personal cash is insulated. Of course I'm sure his business side is what pays for most of his luxuries plus the rather large executive salary he gives himself from the business end of things.

He's different from others like Bill Gates and Steve Jobs. Both of those two owe most of their wealth to stock options and shares. (Steve Jobs' salary last year was just a dollar) If their businesses file for bankruptcy all their personal wealth goes bye bye. Trump, wisely, keeps his personal finances totally apart from his business ventures, which is why he's like some sort of financial roach...keep stomping and he just keeps coming back.

oh ok, playing with words and semantics again. lol

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  • 3 weeks later...

Okay, back to the original topic..."charge off"...I've been doing some googling and trying to come up with a standard answer for this question. Here's my latest...

First of all "charge off" is an accounting term that means "charge against income for profit and loss purposes" and has little or no effect on or benefit for consumers. There are some federal regulations that require credit granting organizations to charge off non-performing accounts at 60 days after the date of first delinquency...but...that does not mean that the debt is forgiven and removed from the creditors books and does not mean that the creditor must stop charging penalties and interest and does not mean that the creditor must stop collections. Those laws also do not require that the creditor report the charge off status to the CRAs.

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