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collections account 'factoring'


addidas
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Midland has 3 collection accounts on me, all of them are charged off completely. 1 is an old utility from years ago and OC is not reporting. Other two are credit card accounts, the OCs are either reporting 'CHARGED OFF/PURCHASED BY ANOTHER LENDER' or 'ACCOUNT SOLD IN BULK' or something close.

 

I am confused; is Midland allowed to list all three of these under 'Loan Type' (from transunion hard copy report) as 'FACTORING COMPANY ACCOUNT'?

 

I see some months they increase the balance as well. Are they allowed to do this even if the original amount from OC is charged off? Or is this is a clear violation?

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They way they list the trade lines on your credit report is irrelevant in my opinion.

 

The question is if the interest is legal by contract or state law. Do they have the contract to prove it? Even if it is passes one of those test it still depends on when the interest charges started. Some JDBs calculate interest charges from the time of the charge off before they owned it. This is illegal and a recent Michigan Case involving Asset Acceptance (also owned by Encore) confirmed this. 

 

http://www.creditcards.com/credit-card-news/charged-off-debt-collectors-1282.php

 

 

FDCPA:

 

The collector cannot misrepresent the amount you owe. [15 USC 1692e] § 807(2)(a)

 

The collector can't add on any extra fees that your original credit or loan agreement doesn't allow. [15 USC 1692f] § 808(1)

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@addidas

 

"Factoring account" is not a violation.   The reason the balance is increased is because Midland is allowed to add interest.

 

Actually I think it is a violation.  BAD debt cannot be factored.  We just learned this in accounting.  When companies sell of current debt portfolios that is factored debt because they factor that in to their net income and is considered an asset.  The acquiring company "factors" that debt as part of their receivables.  However to qualify the accounts must be in GOOD standing.

 

Bad debt has already been written off and therefore is sold off as an uncollectable set of accounts/bad debt and is no longer an asset and has been removed from the net income.  There is NO JDB that is a factoring company for bad debt it isn't possible.

 

I don't think a JDB can add on interest.  I think it's only a collection agency ASSIGNED to collect on the debt that can add it.  

 

We also just learned about assigning rights in law class and once the account is charged off as bad debt it is considered closed and inactive and interest can no longer be added.  The purchasing JDB cannot reactivate that right when they purchase dormant/closed bad debt accounts.  The only way they can start collecting interests is post judgment if they win a lawsuit against the consumer.  

 

When a CA is assigned the account for collection the account is still active and interest still accrues even if the account is closed to further spending activity by the consumer. 

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I don't think a JDB can add on interest. 

 

If that is true someone forgot to tell them, because they all do it. They can add interest as long as it is legal by contract and/or state law. The question that comes into play is if they have the original contract the permits this. If they have the contract and the rate is legal then the question is when did they start adding interest. This is where so many screw up if they add interest from the time the OC charges off the account. 

This is why it is so important to have a competent attorney look over the letters they send. In many cases you can sue them under the FDCPA for doing this.

 

The collector cannot misrepresent the amount you owe. [15 USC 1692e] § 807(2)(a)

 

The collector can't add on any extra fees that your original credit or loan agreement doesn't allow. [15 USC 1692f] § 808(1)

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In regard to factoring accounts, we've had this discussion before.   There's absolutely no case law on the issue for either the FCRA or the FDCPA.

 

Would it be enough upon which to base a lawsuit?   Possibly.  The FDCPA is a strict liability statute, but other than being able to show that it's inaccurate, you'd have nothing else to support your claim.

 

The FCRA is not a strict liability statute.  Unless you could show some sort of injury, it might not be worth your time.

 

 

In reference to interest on a debt, I misspoke when I said a JDB can add interest.  That very well may not be the case in all instances.

 

However, as ArtVandelay pointed out, it depends upon the credit card agreement and/or state law.  If the agreement does not prohibit assessing post charge off interest, the JDB may be able to do so after purchasing the account.  BUT, they can't charge interest for the period that they did not own the account.

 

We need to know what's in our agreements and our state laws.

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Actually I think it is a violation.  BAD debt cannot be factored.  We just learned this in accounting.  When companies sell of current debt portfolios that is factored debt because they factor that in to their net income and is considered an asset.  The acquiring company "factors" that debt as part of their receivables.  However to qualify the accounts must be in GOOD standing. I have said this time and time again, I even poseted a pretty good size thread on factoring.

 

Bad debt has already been written off and therefore is sold off as an uncollectable set of accounts/bad debt and is no longer an asset and has been removed from the net income.  There is NO JDB that is a factoring company for bad debt it isn't possible. I agree and have said this for quite some time. Problem is, the jdb's are the ones that have set the definition of a factoring company. I have not seen a lot of case law on this.

 

 

We also just learned about assigning rights in law class and once the account is charged off as bad debt it is considered closed and inactive and interest can no longer be added.  The purchasing JDB cannot reactivate that right when they purchase dormant/closed bad debt accounts.  The only way they can start collecting interests is post judgment if they win a lawsuit against the consumer.  Agreed, and I have said this before. Look up closed account in Blacks law Closed account: An account to which no further additions can be made on either side, but which still remains open for adjustment and set-off, which distinguishes it from an account stated. I have said time and again that when a debt is sold the account is closed, It is charged off to profit and loss when the OC still owns it, but once it is sold it is considered closed and a complaint for account stated cannot hold up. But no one challenges it that way.

 

 

 

When a CA is assigned the account for collection the account is still active and interest still accrues even if the account is closed to further spending activity by the consumer. When an account is closed it still remains open for adjustment and set-off, but no additions can be made to the account, and is distinguished from account stated. So a claim of account stated cannot hold up in court. It is also accepted as standard accounting procedure.

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Blacks law dictionary:

Financing accounts receivables. It can be maturity factoring, finance factoring, discount factoring, or undisclosed factoring.

 

They only way they can truly say the account was factored is if they bought the account while it was in good standing then you defaulted. The only way the factoring company retains the rights to collect from the debtor is if the seller of the accounts receivables has a nonrecourse agreement with the factor.

 

I say they cannot report as a factoring company if all they did was buy your debt in a portfolio. They report as a factoring company to avoid the FCRA requirements.


 
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