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How much can they legally charge each month for a CO ?


scriptgurl
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I did a search before I posted to see if anyone asked this before but I came up empty.

How much can the OC charge every month in fees etc... to a CO account?

My credit watch comes back as follows:

01/23/07 CRAP ONE balance increase $11

12/15/06 Crap One balance increase $47

11/08/06 CRAP ONE balance increase $32

10/27/06 Crap ONE balance increase $8

10/06/06 Crap one balance increase $29

09/11/06 Crap one balance increase $30

08/26/06 Crap one balance increase $28

07/13/06 Crap one balance increase $2

07/11/06 Crap one balance increase $100

05/20/06 Crap one balance increase $20

05/18/06 Crap one balance increase $49

04/24/06 Crap one balance increase $27

03/20/06 Crap one balance increase $29

02/27/06 Crap one balance increase $58

Is this legal ?

This is most recent reporting as of 01/18/07

Account Number: *******XXXX Current Status: CHARGE-OFF

Account Owner: Individual Account. High Credit: $0

Type of Account : Revolving Credit Limit: $0

Term Duration: Terms Frequency: Monthly (due every month)

Date Opened: 01/2000 Balance: $3,269

Date Reported: 12/2006 Amount Past Due: $3,269

Date of Last Payment: 03/2001 Actual Payment Amount: $0

Scheduled Payment Amount: $0 Date of Last Activity: 09/2001

Date Major Delinquency First Reported: Months Reviewed: 11

Creditor Classification: Activity Description: Closed

Charge Off Amount: $1,635 Deferred Payment Start Date:

Balloon Payment Amount: $0 Balloon Payment Date:

Date Closed: 03/2002 Type of Loan: Credit Card

Comments: Charged off account,

Account closed by credit grantor

81-Month Payment HistoryYear Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006 * * * * * * * * * * *

2005 * * * * * * * * * * * *

2004 * * * * * * * * * * * *

2003 * * * * * * * * * * * *

2002 120 120 CO * * * * * * * * *

2001 * * * * * * 30 * * 30 60 90

2000 * * * * * * * * * *

Payment History KEY

Meaning Symbol Meaning Symbol

Pays or Paid as Agreed: * 180+ Days Past Due: 180

30-59 Days Past Due: 30 Collection Account: CA

60-89 Days Past Due:60 Foreclosure: F

90-119 Days Past Due: 90 Voluntary Surrender: VS

120-149 Days Past Due: 120 Repossession: R

150-179 Days Past Due: 150 Charge Off: CO

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They can increase it by the default interest rate (typically somewhere around 30%, divided by twelve for the monthly rate) each month, so you're looking at ~ $82/month. Looks like they're charging around $34/month, with varying reporting dates.

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They can increase it by the default interest rate (typically somewhere around 30%, divided by twelve for the monthly rate) each month, so you're looking at ~ $82/month. Looks like they're charging around $34/month, with varying reporting dates.

I'm not so sure about that. I'll have to dig up my copy of the federal regulations again, but once an account is charged off to loss, it is removed from the assets on the books and placed in uncollectable loss. They then include it on their quarterly tax reporting to the IRS as a capital loss. Once the loss is claimed on the amount, they cannot keep "double-dipping." They have received a tax benefit from reporting the loss so they cannot keep treating it as if it is still an asset.

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I'm not so sure about that. I'll have to dig up my copy of the federal regulations again, but once an account is charged off to loss, it is removed from the assets on the books and placed in uncollectable loss. They then include it on their quarterly tax reporting to the IRS as a capital loss. Once the loss is claimed on the amount, they cannot keep "double-dipping." They have received a tax benefit from reporting the loss so they cannot keep treating it as if it is still an asset.

I would be interested in that information.

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  • 1 month later...

I am not sure about the amount they can charge each month. (sorry I can't help you there).

But I do want to point something else out to you, incase you weren't aware, and that is by the DOLA, not only should this drop off your credit report in another 12 months, but in most states, the SOL has expired, and even though they can hound you, they can add a $1000 a month in fees, but will never be able to get them from you. Once past the SOL, they can sue you, but you can show the courts that it is passed the SOL and ask for a dismissal.

I am dealing with this very issue with Crap1 right now, they are trying to sue me for an account that the SOL expired 4 months before they filed. The original amount was less than 400, now, with all the "FEES" it shows 2300 as the balance on my CR.

Sorry if you already were aware of all this.

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  • 2 weeks later...

First, a "charge off" is a non-event as far as us debtors are concerned. It does mean "charge against income for tax purposes" but it has no bearing on whether or not we owe the debt and does not mean the creditor will stop trying to collect. Depending upon the terms and conditions of your original agreement with the creditor, they may continue to charge interest and late fees.

We have discussed before that there are indeed some FDIC rules regarding charge off for federally insured banks and savings associations that do say that those institutions are supposed to "write off" a bad loan within 180 days of default and remove it from their books. Note that "write off" and "charge off" are sometimes used interchangably, but they really do mean different things.

The FDIC rules do not m take it clear whether the e institution should stop charging interest...and, it is not at all clear whether those rules apply to the credit card issuing subsidiary of a bank. The IRS also has some rules regarding charge off (not write off) but the IRS gives them 3 years after the last "identifiable event" do stop charging interest.

The only time that a creditor must absolutely stop charging interest is when they write off the account, issue you a 1099c, and sell the account to a JDB.

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Its my opinion that the amounts shown are more for their tax benefit and P&L statement than for a real number. In theory, for accounting purposes, they can CO an amount when you're default a couple of months, charge you interest and penalty on that amount for another couple of months, and then charge off that amount also. Eventually, they'll get around to "writing off" some amount that may be entirely different.

The only real number I'm aware of is that when they issue your 1099c, they're supposed to divide it into two categories...what you actually borrowed, and their vigorish, although I think the IRS lets them report both in one total, and then mark a box saying that the amount included interest.

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As a former bank examiner, the FDIC and NCUA require that nonperforming loans be charged off in no more than 180 days.

As far as accruing interest, they are also supposed to stop accruing interest on those debts since they are non-performing assets and losing value. The AICPA has put out several items about valuing non-performing assets.

However, JDBs and CAs are not bound by those regulations and can charge pretty much whatever they can get away with.

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As a former bank examiner, the FDIC and NCUA require that nonperforming loans be charged off in no more than 180 days.

We've never been able to establish whether the credit card issuing people fall under these rules. Since many CC's seem NOT to follow the 180 day WRITE OFF, I don't think they're covered.

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We've never been able to establish whether the credit card issuing people fall under these rules. Since many CC's seem NOT to follow the 180 day WRITE OFF, I don't think they're covered.

Seriously, Willing, don't count on that theory. I spent 2 years in the First Chicago Bank's law department. They will do whatever they think they can get away with until a regulator tells them to stop.

The FDIC and the OCC are so soft-handed that most of the time the bank is just told to stop the practice with no fine or penalty. The OCC likes to call them "advisory letters."

Yes there are regs they are supposed to follow. Do they always follow them? Heck no. If you bust them on it, they just deal with you and keep screwing over others that don't complain.

The fact that the FDIC and the OCC are funded by the banks means they don't do much when a bank oversteps the rules. But when banks do things that draw the attention of Congress, now that's when they snap-to. They don't want Congress to mandate better enforcement of the regs.

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Seriously, Willing, don't count on that theory. I spent 2 years in the First Chicago Bank's law department. They will do whatever they think they can get away with until a regulator tells them to stop.

Oh I certainly agree. I guess my point is that we know that not all CC companies charge off accounts within 180 days...or, at least, they do not report accounts to the CRAs as CO within 180 days. We also know that even the ones that do, do not stop trying to collect or charging interest or charging penalties or give up ownership of the account. We also know that the IRS allows them to carry the account on their books for years after the CO.

So, in essence, a charge off is a non-event as far as we are concerned. It just doesn't have any meaning we can count on.

Now, we a CC company does get around to actually "writing off" the account and they set their balance to $0 and they sell it to a JDB...now that's something that has meaning. But until that point, CO don't mean squat.

(And, I also think that MasterCard and Visa and the other card clearing house organizations somehow insulate the banks and credit unions from the FDIC rules regarding "non-performing" loans. AMEX for example, is a credit card company that just happens to own a bank. The bank may be FDIC regulated, but the parent company isn't. The whole CC business is just too lucrative to let government regulations get in the way).

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Alrighty then, here's a cite direct from the horses mouth...

http://www.phil.frb.org/pcc/discussion/MeasuringChargeoffs_092003.pdf

...which says on the bottom of page 4, in effect, that for federally charted banks...

Most of the entities described in this paper report "net chargeoffs". This means that the reported chargeoff rate in any given month is "net" of recoveries. Recoveries represent debt that the card issuers are able to collect after an account has been charged off. Recoveries can be generated by selling charged-off debts to collection-agenices (typically for a few pennies on the dollar) or by securing post-chargeoff payments from debtors. Because a recovery can be realized months after a debt obligation has been charged off....

There's another interesting discussion later on regarding...

Off-balance-sheet financing requires that issuers sell a portion of their credit card receivables to an unconsolidated trust. The trust then issuess securities to investors backed by those receivables.

Which I think means, even FDIC banks can turn their CC holdings into something other than accounts that are subject to the 180 day charge-off rule.

Bottom line. "Charge off", whatever it means to the CC issuer, DOES NOT mean the bank stop trying to collect the full amount. It DOES NOT mean they have any real incentive to "settle" for less than the full amount. It DOES NOT mean they will stop charging penalties and interest. For us debtors, charge off don't mean squat.

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