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Dilemma - pay off a 25yo charge-off?


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I recently applied for a home equity loan at a local credit union. They had a good fixed rate whereas the CU I belong to only has a variable rate. Imagine my suprise when the loan officer informed me that I'm ineligible to be a CU member -- and thus denied the loan -- due to a 25 year-old charge off on an auto loan! I have a very vague memory of this charge-off; It's been a quarter century (I can't even remember what color the car was!) and the CU was under another name at that time.

Anyway, it seems my parents had cosigned the loan for me back then and included the remaining $440 balance in their bankruptcy filing a couple of years later. Now, I realize that I'm not legally bound to pay this debt, but I feel compelled to do so on moral grounds. With interest, this debt has grown to over $1800. However the CU has said that they would accept $675 as payment in full.

If I pay the $675, I would be allowed to become a member of the CU. Whether I would still get the home equity loan from this CU is another matter. However my credit report/score is excellent (780+) and I'm sure I can get the loan elsewhere UNLESS -- and here's the rub -- the CU reports a paid charge-off to the CRAs!

Is this possible? By reopening this charge-off, will the CU have legal standing to submit a negative account to the CRAs? Please advise!

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How in the world is a charge-off from 25 yrs ago showing up on your credit report? Have you actually checked your credit report? Charge-off accounts normally drop off after seven years or so. If that charge-off is not showing, I would do some shopping for other institutions that offer the same rate you are looking for. There are plenty out there. If it IS still showing, then you need to dispute it with the CRA to get it taken off. Good luck!!

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Hi Bevj2,

None of the 3 CRAs report anything negative -- my credit is very good. The only place it's showing up is internally at that CU (then under a different name) who granted the original loan that my parents had discharged when they filed bankruptcy 25 years ago. Seems quite a long time to hold onto that info, no?

My fear is that paying off this loan as a good will gesture will come back to bite me.

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Well, in my opinion, I would just try to find another lender, and let sleeping (or should I say DEAD) dogs be. You don't need to pay off that charge-off, with your credit score you should have no problem finding another lender (assuming everything else is good such as income, job stability, etc.).

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Of course you're all correct. When I remember my previous dealings with creditors and collection agencies and all of the lies, crooked methods, and harassment that they heaped on my wife and I, it really does seem a no-brainer. While I would have liked to amend a small wrong, shame on them for making the rules that made that impossible.

Thanks all for your replies!

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but one thing is missing.

The big question.

How much will you be suing these scumbags for violating the federal bankruptcy court order, the FDCPA, invasion of privacy, harrassment, and any other state law violations?

Thats what inquiring minds want to know.

How much of a payday did the attorney say you could get on this contact?

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Trueq, I never had a problem with this particular creditor. My memory of the loan is very sketchy -- I can't even recall if I defaulted on the loan or whether my parents just included the loan in their bankrutpcy to protect themselves.

They denied my recent loan application because they only loan to members. They denied my membership because of the 25yo charge-off. I'm guessing that's a legal way to skirt around any FDCPA violation?

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erroneously reporting this debt and/or pursuing this debt as valid. Not the people that denied you credit. (Unless they are one in the same.)

You get an affidavit from people that denied you, (just detailing why you were denied) that this was the reason you were denied---actual damages under FDCPA.

If they are one in the same, then, yes, if you want to keep good relationship--don't sue them.

But I would not be concerned about "good relationship" with someone holding a 25 year, out of statue debt, against you!

Edited by trueq
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The CU where the charge-off occurred all those years ago is the same CU that denied the loan this week. They were under a different name back then when the bankruptcy was discharged -- no idea if/how they restructured the business other than the name change. Would a change in ownership make them a different business and thus open to a violation?

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In essence the "old company" is reporting a debt to the "new company" not allowed to be reported, legally, for consisderation of credit.

You were injured by the denial of credit. The FCRA does not allow adverse information beyond a 7 year for accounts & 10 year for BK.

The question here: Is it a violation of FCRA (or some other law) if reported by some other means than the credit reporting agency?

I could see a motivated attorney tackling this for you.

You have the right not to be haunted by 25 year old financial challenges.

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That's certainly something to consider. I'll have to gnaw on it a bit.

Funny thing. Because my wife was a cosigner on the equity loan app, we received seperate notices of adverse action today. Her loan request was denied for the same reason as mine: "Not eligible for membership in this credit union". Guilt by association. LOL

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