NoahSantiago

Sued by Discover over debt already settled!

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Here are the facts of the case:

1. I've had my Discover card since 1996 and always kept it paid off fully every month until around 2014 when I experienced the all-too-common medical expenses for the first time and ran up a debt of ~$14K and couldn't afford to make payments any more.

2. In January of 2016, after a long series of threatening emails and offers to make various arrangements, I received an email from Discover offering to settle my balance in full for 30%.

3. I borrowed the 30% (something like $4.2K) and sent it to them via check. I included a copy of the email, and wrote in three places (a post-it I attached to the email copy, the payment slip, and the back of the check) that depositing the check indicated Discover accepted the account as settled completely. They deposited the check before the 15-day limit the settlement offer had required had run out.

4. Lo and behold, I kept receiving statements that listed the remaining 70% as due. I figured it was just taking time for the settlement to move through the Discover bureaucracy, so I didn't bother responding.

5. In mid-November of 2016, a received via normal uncertified mail a court summons saying that I was being sued by Discover for the remaining 70% and that I had to respond within 30 days. CIR was representing them.

6. Since I had not been legally served, only sent a copy via uncertified mail, I figured I could move to have the case dismissed later if a judge ruled for them by default, so I did not respond to the summons. Instead, I sent a letter to the CIR attorneys via certified mail that included copies of the email offer to settle, my payment slip with its paid in full language, and my cancelled check that had the paid in full language on the back. I explained that their suit had no basis and asked them to dismiss it.

7. Apparently, they forwarded everything to a certain M. Johnson, Sr. Dispute Investigator at Discover. In late February of 2017, I received a letter from M. Johnson stating that he had reviewed my dispute, had found the balance to be valid, and had forwarded his findings to CIR. He included several of my statements and a copy of the FRONT of my payment check, but not the back with its paid in full language.

8. Shortly thereafter, I received another letter via uncertified mail informing me that new attorneys had been assigned to my case.

9. I wrote three letters--one to M. Johnson and one to each of the two attorneys I had been assigned--sent via certified mail that included copies of the offer to settle for 30%, my payment slip that included the paid in full language, and the cancelled check with its paid in full language on the back asking them again to dismiss the case. I have yet to receive responses from any of them.

So what's my next move? Do I wait to see if they respond? Did I screw myself by not responding to the initial summons, even though it only came by uncertified mail and I wasn't served properly? The debt was settled fully in 2016 and I have the paperwork to prove it.

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Important Account Information for Addressee Only

 

Current Balance : $13,608.25
Amount Now Due : $13,608.25
 

Dear
 

Tax season is a good time to review your finances. Many people use their tax refund to pay off their debts. We're pleased to offer you a money-saving way to clear up your debt with us.

If you act now, we will agree to accept 30.00% as settlement for the balance on the Discover® Card Account listed above.

A 30.00% settlement means you'll pay just 30.00% of your balance. You'll also be free of collection calls and future fees.

Your acceptance of this 30.00% settlement offer will satisfy the debt on this Account. Please call to accept this offer now.
 

The failure to meet any agreed upon payment that is part of this settlement by the payment due date will cause the settlement to be null and void and will result in the entire remaining account balance becoming due immediately.
 

In addition there may be certain tax consequences. Whenever $600 or more is forgiven as a result of settling a debt for less than the balance owed, the creditor may be required to report the amount forgiven to the Internal Revenue Service on a 1099C form, a copy of which would be mailed to you by the creditor. If you are uncertain of the legal or tax consequences we encourage you to consult your legal or tax advisor.
 

Don't wait. This offer expires in 15 days from the date of this letter.
 

Please call us promptly at 1-800-347-3149 between the hours of Monday through Friday 8:00 am to 9:00 pm, and Saturday 8:00 am to 12:00 pm EST to discuss important account information. We will be happy to answer your questions and address any concerns you may have regarding this account.
 

Sincerely,
Angie Francis
Cardmember Assistance, Discover Card
1-800-347-3149
Monday through Friday 8:00 am to 9:00 pm, and Saturday 8:00 am to 12:00 pm EST
 

This is an attempt to collect a debt and any information obtained may be used for that purpose.

 

I would say the most salient passages are:

If you act now, we will agree to accept 30.00% as settlement for the balance on the Discover® Card Account listed above.

 

A 30.00% settlement means you'll pay just 30.00% of your balance. You'll also be free of collection calls and future fees.

 

Your acceptance of this 30.00% settlement offer will satisfy the debt on this Account

 

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No, I didn't call. I wanted a paper trail and a check that included the famous paid in full language per the Uniform Commercial Code § 3-311. It only says "please call to accept this offer." It never mentions calling as a stipulation of the offer.

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@NoahSantiago

You said they deposited it before the 15 days were up.   Are you referring to 15 days from the date on the letter/email?

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Just now, NoahSantiago said:

Yes. It said "This offer expires in 15 days from the date of this letter." The letter was dated 1/12/2016, and they deposited the check on 1/25/2016.

Then I would contact an attorney and let him review everything.   I don't know for sure, but if everything is as you believe, you might have claims against Discover.

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I would first check with the local courthouse and see if a suit has been filed against you. California is not a pocket docket state so they need to file a suit to commence it and they would need to properly serve you. If there is a case against you, file an answer immediately, requesting mercy from the court because you were improperly served, and the answer should state accord and satisfaction as an affirmative defense.

Since Discover is a original creditor, you cannot get them on the FDCPA. Based on what you say, your best outcome might be to get the case dismissed or to get a judgement for the defendant (you win). That said, you should consider a free consult with a consumer attorney since you have the paperwork in order for a settlement.

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Here is my two cents worth:

8 hours ago, NoahSantiago said:

No, I didn't call. I wanted a paper trail and a check that included the famous paid in full language per the Uniform Commercial Code § 3-311. It only says "please call to accept this offer." It never mentions calling as a stipulation of the offer.

"Please call to accept the offer" IS the stipulation.  You didn't call.  The better recourse was to call and accept and then get them to agree they will return a SIGNED settlement agreement and then you pay.  You simply made assumptions you could do it your way and have left open the possibility that Discover can successfully argue to the court you didn't comply with THEIR settlement terms therefore it is null and void.

9 hours ago, NoahSantiago said:

I included a copy of the email, and wrote in three places (a post-it I attached to the email copy, the payment slip, and the back of the check) that depositing the check indicated Discover accepted the account as settled completely.

NONE of that (especially the post it note) except possibly the email is legally binding on Discover.  It is a complete myth that if you put that statement or "paid in full" on a check or enclose a post it note that it legally binds the other party.  It does not.  Including that language is a one sided offer because you are already in debt/obligated to pay Discover $13k the offer is lacking consideration under contract law.  There has to be a meeting of the minds PRIOR to the final act for it to binding under contract law.  

Discover can make the argument that because you didn't call to accept the offer there was no meeting of the minds therefore you merely sent a large payment and the rest of the balance is still owed.  Your counter argument is that you sent the 30% they offered within the time frame and indicated you accepted and they deposited it timely therefore it is binding.  There is NO way to tell which way a court will go with this.

One thing is for certain:  if they DID sue you do NOT let it play out to default judgment and then try to undo it.  This is one situation where you need to aggressively defend the action if it gets that far.

 

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Wait a minute. How is this a complete myth?

§ 3-311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT.

 

(a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.

(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

(c) Subject to subsection (d), a claim is not discharged under subsection (b) if either of the following applies:

(1) The claimant, if an organization, proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place.

(2) The claimant, whether or not an organization, proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that that sent a statement complying with paragraph (1)(i).

(d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim.

 

1. I DID in good faith tender the check to the claimant as full satisfaction of the claim.

2. The amount WAS unliquidated

 

"the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim."

Both the instrument (the check) AND an accompanying written notification (the deposit slip and the post-it attached to the email copy) contained a " a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim. "  Section 3-311 only requires one or the other: "an accompanying written communication" or the instrument itself; I had both.

So where does the "complete myth" part come in?

Also, would anyone else care to weigh in on whether the calling them was a legally binding stipulation? The email did not include any statement about the offer being void if I paid without calling first.

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You  can argue with me all you want.  The reality is Discover disagrees with you and has sued.  I gave you a very real possibility of what you could face in court.  You need CASE LAW from your state showing that you are right and Discover is wrong.  You either get prepared for it or get steam rolled by Discover. Your choice.

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@NoahSantiago

The claim may liquidated, not unliquidated.  Usually an unliquidated claim is one for which the value has not been determined.  A liquidated claim means the value has been determined.  

Did you ever dispute the debt?

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1 minute ago, NoahSantiago said:

And also, I'm wondering now if the Uniform Commercial Code overrides a California case ruling that dealt with the issue.

What is the CA case?

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I don't know what the California case is, or even if one exists. I'm going off of Clydesmom's statement that I "need CASE LAW from your state showing that you are right and Discover is wrong. " I'm not trying to argue with anyone. I'm just trying to understand.

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Just now, NoahSantiago said:

I don't know what the California case is, or even if one exists. I'm going off of Clydesmom's statement that I "need CASE LAW from your state showing that you are right and Discover is wrong. " I'm not trying to argue with anyone. I'm just trying to understand.

Oh, ok.  I thought you meant you knew of a case.

This is why you need to speak to an attorney.  CA's Commercial Code seems to mirror the federal code.   The code says that the claim must be either unliquidated or disputed.

In your case, the claim could be considered liquidated because the balance has been determined.  That's why you'd need to have had a prior dispute regarding the balance or account.  

Here's a  CA ruling.  It's unpublished (not precedent) but perhaps it can help you in some way.

https://scholar.google.com/scholar_case?case=9103082464921157972&q="3311"+AND+"accord+and+satisfaction"&hl=en&scisbd=2&as_sdt=4,5

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22 minutes ago, NoahSantiago said:

I'm not trying to argue with you. I asked how the paid in full instrument was a complete myth. Does the Uniform Commercial Code not apply to California?

The UCC does apply to California.  The problem I potentially see is HOW you are applying it.

Here are some references as to why you cannot just send a post it note or write on the check "paid in full" or "full settlement if cashed" and have it be legally binding:

http://www.snopes.com/business/bank/paidfull.asp

http://douglaswhaley.blogspot.com/2011/04/payment-in-full-check-powerful-legal.html

http://law.freeadvice.com/general_practice/contract_law/paid-in-full-checks.htm

The second reference explains why the UCC does not support what you did.  It has to do with accord and satisfaction.

24 minutes ago, NoahSantiago said:

No, I never disputed the debt before they made the offer. I'm disputing it now.

Because you did not dispute the debt prior to sending the payment then the UCC would not apply.  Disputing it NOW that they won't accept it as payment in full does not support the UCC defense.  An example:  your balance was $10k but you disputed one charge for $1500 as fraudulent three times and it was not credited.  You sent payment for $8500 as "full payment" the UCC would support it as full accord and satisfaction as the $1500 was ALWAYS in dispute.

You are disputing their collecting the balance now because you are claiming you accepted their settlement offer.  Discover is claiming you did not accept it because you did not meet their terms of calling to accept the offer formally.  You state the letter didn't say that not doing so would void the offer.

I maintain Discover is going to claim that by openly saying "call to accept this offer which is void after 15 days of the date of the letter" it is clear that you needed to do exactly that:  CALL THEM and indicate you were taking the offer prior to that 15th day.  You did not do that. You simply mailed the payment with a post it note and that added phrase on the check.  

Now that Discover has sued you are going to need to prove your point to the satisfaction of the court.  Finding case law means looking up other cases where a consumer acted the same way you did and a court ruled in their favor.  Case law from your state where judge(s) have ruled that what you did constituted acceptance of the offer and is binding on the creditor is what you need.

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@NoahSantiago

I think at some time or another, a "myth" was circulating that one could settle bills by sending a check with the words "paid in full" written in the memo.   It was based upon the Uniform Commercial Code.

As I explained before, the UCC requires that a debt be unliquidated or in dispute.   Again, unliquidated usually means that the balance or value has not been determined.   In the event that there's a determined balance (liquidated), there must be a dispute.

Now, I'm not sure that just any kind of dispute would satisfy the code.   It would need to be a good faith rather than frivolous dispute. 

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Thank you to both of you. Yes, there have many articles debunking the paid in full check. However, those articles were usually based on the person writing the check acting in bad faith to get out of a debt; I was acting in good faith based on an offer they made voluntarily.  But it appears I did not meet the requirement of having a bona fide dispute prior to sending the check. So I suppose my case hinges on whether I was failing to meet the requirements of their settlement by not calling them before I sent the payment.

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15 minutes ago, NoahSantiago said:

Thank you to both of you. Yes, there have many articles debunking the paid in full check. However, those articles were usually based on the person writing the check acting in bad faith to get out of a debt; I was acting in good faith based on an offer they made voluntarily.  But it appears I did not meet the requirement of having a bona fide dispute prior to sending the check. So I suppose my case hinges on whether I was failing to meet the requirements of their settlement by not calling them before I sent the payment.

 Just speak to an attorney. He should know whether or not you have a valid defense or any claims of your own. Good luck! If you speak to an attorney, please let us know what he tells you.

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