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Will I reset the 7 year reporting limit if I pay an already settled account?


duck1098
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I settled Macy's and its reporting settled in full for less than full balance. It was only a $400 debt  and I regret not paying in full. Will they count them as 2 payments and  reset the clock if I pay them the remaining $200 after it has been settled and closed?

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If you settled and paid Macy's directly before, then according to the letter of the law...paying them completely now will "bring the account current" and will reset the 7-1/2 year reporting period. 

 

However, if you contact them directly, and offer to pay them off...its possible they will agree to delete their tradeline.  Be sure to get any agreement to that effect in writing BEFORE you send money.

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If you settled and paid Macy's directly before, then according to the letter of the law...paying them completely now will "bring the account current" and will reset the 7-1/2 year reporting period. 

 

However, if you contact them directly, and offer to pay them off...its possible they will agree to delete their tradeline.  Be sure to get any agreement to that effect in writing BEFORE you send money.

I actually settled with their collection agency and they sent it to Macy's.

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If you settled and paid Macy's directly before, then according to the letter of the law...paying them completely now will "bring the account current" and will reset the 7-1/2 year reporting period. 

 

How so? I have the understanding that the account would still have the "Charged Off" status, but instead of saying "settled for less than balance" it would say "paid". So the 7.5 year period would still be when the first 30-day late occured and never improved. However, I agree that you shouldn't pay it, since it will likely cause the tl to weigh more on your score, and even though its paid its still a charge-off.

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The "date of first delinquency" according to the FCRA is when the (paraphasing) "account first went delinquent and was never brought current".  Theorectically, "paid in full" brings the account current.  Of course, YMMV.

 

 

I guess its a matter of interpretation then, because I look at it as that the account is closed upon a charge-off, so it doesn't have the opportunity to become current again. Example: I am 30,60 days late, then pay and am current, then am late 30,60,90, and finally they charge it off. The DOFD would be that second 30 day late, because the account never recovered after that point and was closed, leaving a balance due to the creditor. But even if a payment is made, the account is still charged off. Just the date of last activity will change.

 

I only say this because I have paid a 3 year old charge off (+ judgement) in full, and the estimated date this item will be removed didn't change. But I suppose you're right - YMMV.

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Sorry, but, an account is not closed upon charge off.  (This is one of the misconceptions the credit and collection industry use to confuse us.)

 

Charge off is just an accounting term that means "charge against accrued income for profit and loss purposes", and the account is moved from the "performing" category to the "non-performing" category.   It has no real significance as far as the debtor is concerned.  Most OCs also "close" the account to further charges by the debtor, but even that doesn't mean anything other than you can't charge on it anymore.

 

The account is still "active" on the OCs books and continues to be active until the debtor makes a settlement agreement, pays it in full (which bring it current and resets the DOFD), or the OC does a  "write off" or sells it to another lender which does not reset the DOFD.

 

Confused?  That's what they intended.  The CRAs are NOT our friend...

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The FCRA seems pretty clear, what am I missing that allows them to reset the date of first delinqency?

 

http://www.ftc.gov/os/statutes/031224fcra.pdf Pages 21-23

 

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c]

 

(a) Information excluded from consumer reports. Except as authorized under subsection ( b)of this section, no consumer reporting agency may make any consumer report containing any of the following items of information:

...

(4) Accounts placed for collection or charged to profit and loss which antedate the report
by more than seven years.
 
(5) Any other adverse item of information, other than records of convictions of crimes
which antedates the report by more than seven years.

...

(c ) Running of Reporting Period
(1) In general. The 7-year period referred to in paragraphs (4) and (5) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
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@ I think you're probably right.  The link at the top of the page for the FCRA does include that paragraph which does include the words "charged to profit and loss" as one of the  triggers for starting the 7 year reporting period.  There are some footnotes referenced (which I can't read right now since the FTC web site is closed because of the government shutdown) which may shed some light on if or when this wording was changed.

 

So...I should probably rethink my opinion.

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Okay, I've given this some thought, and I have a couple of comments...

 

First, the phrase "charge against profit and loss" could relate to the FDIC rules (not laws) for FDIC insured banks that require "non performing debts" to be written off within 180 days of default.  Note that the terms "write off" and "charge off" do not mean exactly the same thing, although they are used interchangably in credit reporting.  And, furthermore, we've never found any rule or law that clearly states that the FDIC guidelines apply to the credit card issuing subsidiaries of banks.  Its possible that this section of the FCRA could only apply to secured loans, mortgages and the like...in other words, not credit cards.

 

Second, if a CC CO is indeed covered by this section of the FDCPA, then a creditor pressuring the debtor to make arrangements to pay a debt "before it charges off" is entirely self serving.  A CO is not of any real concern to the debtor, and actually (assuming you can't pay) is actually a good thing because it starts the 7 yr clock.

 

When the FTC site is back up, I'll try to research this a little further.

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Okay, I've given this some thought, and I have a couple of comments...

 

First, the phrase "charge against profit and loss" could relate to the FDIC rules (not laws) for FDIC insured banks that require "non performing debts" to be written off within 180 days of default.  Note that the terms "write off" and "charge off" do not mean exactly the same thing, although they are used interchangably in credit reporting.  And, furthermore, we've never found any rule or law that clearly states that the FDIC guidelines apply to the credit card issuing subsidiaries of banks.  Its possible that this section of the FCRA could only apply to secured loans, mortgages and the like...in other words, not credit cards.

 

Second, if a CC CO is indeed covered by this section of the FDCPA, then a creditor pressuring the debtor to make arrangements to pay a debt "before it charges off" is entirely self serving.  A CO is not of any real concern to the debtor, and actually (assuming you can't pay) is actually a good thing because it starts the 7 yr clock.

 

When the FTC site is back up, I'll try to research this a little further.

 

I can understand and agree with your thinking - if a credit card company wanted to carry a defaulted account more than 180 days, based on what you have said, they technically could; whereas an installment loan would have to be charged off based on FDIC rules. But I believe once a CC company reports it as a "charge off" to the CRAs, the CO falls under 605(a)(4) because irregardless of the type of account, they are still charging a debt against a profit/loss account. Creditors are constantly butchering accounting terms and their meaning (think "Factoring Company"), which is why I think the meaning of "charge off" isn't as important as them using the acutal words "charge off" in the credit report and their relation to the FCRA.

 

I also agree that the creditor pressuring payment before chargeoff is self-serving and I never really thought of it like that. According to 605( c)(1), they seem to only consider "adverse information" as a collection or charge off, so as long as the OC keeps the account, you could have a 180 day late stick on your report for more than 7.5 years (assuming the account was not marked for collection). Further, just from experience, the settlement amounts are much more appealing after a charge off vs being 120 - 180 days late, meaning some creditor is getting a lot less $$$ after the CO. However, if you were to keep a letter received after a 30 day late that states "this is an effort to collect a debt" etc.. I bet it could be argued that the letter confirms the account is under internal collections and therefore the 30 day late is subject to 605(a)(5) and should be removed after 7.5 years.

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... the settlement amounts are much more appealing after a charge off vs being 120 - 180 days late, meaning some creditor is getting a lot less $$$ after the CO. However, if you were to keep a letter received after a 30 day late that states "this is an effort to collect a debt" etc.. I bet it could be argued that the letter confirms the account is under internal collections and therefore the 30 day late is subject to 605(a)(5) and should be removed after 7.5 years.

Now, there's some additional food for thought.

 

I suspect that settlements are better after CO because they've already taken their "charge against income for P&L purposes" on the interest and penalties, annd are only looking to recover their investment (i.e., the money you actually charged on the account).  I would bet if we had their actual numbers to work with, we'd find that, on the average, the amount charged portion of the reported balance is in the 30-50% range.

 

And second, the FCRA does imply that placing an  account for "internal collection" triggers the 7.5 yr reporting period.  Good to know.

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