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Posted in Credit repair, but thought this might be a better thread

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So im getting ready to buy a house and it looks like this might be my only snag. here is a statment of events that I typed up for the Morgage people

In June 2006, my wife and I decided to consolidate school loans with Academic Loan Group. Loan balances were:

Loan1 – Direct Loans – $28,310

Loan2 - Direct Loans/Dept of Education - $16,906

After paperwork was signed, my wife and I made payments to ACS as expected.

In May 2007, I started receiving default notices from Department of Education that my school loan was in default. I called them and advised the collections department that my loan had been consolidated with my wife’s school loan with ACS. They said they would research it and get back to me. I never heard back from anyone, so I assumed it was OK.

In June I pulled my credit report using truecredit.com and noticed that the loans were now in charge off status. I called Department of Education and spoke to someone helpful that informed me that I was mistaken about ACS having my loan. They said that ACS did mail a check to them, but it was returned because it was made out to “Direct Loans” and should have been made out to “Department of Education”. After further review I found that ACS took the payment back and instead of issuing a new check to “Department of Education” they just applied the returned check to my balance and never informed me of any of this. When my wife contact them mid june, they simply told her that yes the payment was sent back but they were unsure why. They would research and call her back. She has yet to receive a call back.

In the meantime I found out that my default loan with Department of education has been referred to an outside collection agency. CBE Group. I have yet to contact them nor heard any contact from them.

My idea was (the most time consuming) wait for CBE to report on my credit report than dispute the Department of Education negatives. They should be deleted at that time because CBE is now reporting the negative. Then go to ACS to demand repayment for the 17K that was returned and use that money to pay CBE for a pay for delete - 17K is a nice chunk for a Collection agency to collect on so they might do it. (they have done it for less) Sound good?

My next question is: What if ACS refuses to repay the money for the loan that was refused originally. Now im stuck with a 17K collection that I cant pay back. and a loan from ACS that payments and apr were figured at 48K instead of just 28K from Loan 1. Do I have any Legal recourse? Its all sounds a fraudulent to me. And it could have all been avoided if a few people did thier jobs in the beginning.

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In response to your first question, that's not the way credit reporting works. The original creditor can still report your bad payment history with them, and the CA can report on the same account too.

As far as the other question, I think if ACS refused to pay, you would have a breach of contract claim. Most likely they will pay the money they collected so far. As for the penalties, etc. for late payments to OC, maybe you will get stuck with those because you didn't fill out the forms properly. They probably took the name to write the check out to from some paperwork you submitted.

They might be able to negotiate for you, but worst case scenario you get stuck with late fees and penalties and a bad credit history.

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