When a debt becomes six (6) or seven (7) months delinquent, many credit card companies charge off the debt and sell it to a collection agency for pennies on the dollars.
Wikipedia defines a charge off as a “declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected. This occurs when a consumer becomes severely delinquent on a debt.”
It is surprising how inexpensively banks sell their charged off credit card debt to collection agencies. The Monkey was once involved in a credit card litigation where the attorney for the collection agency mistakenly sent the Monkey a spreadsheet of delinquent accounts purchased from Chase Bank. The spreadsheet documented every account that the client agency purchased in that debt pool. More that than that, it even listed how much the collection agency paid for the my client’s charged off debt and every other charge off in the spreadsheet.
The debtor allegedly owed Chase about $8,400.00. Even the Monkey was shocked when he discovered that Chase sold the charged off debt to the collection agency for a few pennies over $27.00, SIMPLY AMAZING.
By law, the collector which purchased your credit card account from a bank has the right to collect that debt in full. In the case of my former client, that means the collector could attempt to collect all $8,400.00, regardless of what it paid Chase for the debt.
Unlike most banks, collection agencies regularly use aggressive tactics like intimidation, threats, telephone harassment and lawsuits without proper evidence to collect what they claim is owed to them. Harassment and aggressive collection tactics are illegal, but that rarely stops individual collectors from being obnoxious and threatening.
Collectors use illegal tactics because they are paid by commission. The more they collect, the more they get paid. They approach collections thinking that your money is their money. You are their piggy bank.
To help balance the scales of power in collections, here are four hacks that will stop aggressive collectors in their tracks:
Never deal with a collector over the telephone.
Always ask for information and offers to settle in writing. By doing this, you have time to thoughtfully consider the collector’s offer without the pressure of an agent on the other side of the telephone hammering you to boast his monthly commission check.
If you decide to pay a collector, never pay the initial amount offered, even if it is discounted.
You can save more. REMEMBER, the collector bought your debt at a huge discount and will accept lesser amounts if you negotiate. Think of a debt collector as a used car salesman. Push for a better deal until you can’t get the best deal you can. If you must, tell the collector that your brother is a bankruptcy attorney. Then threaten to file bankruptcy. That will get his attention. Remember, all’s fair in love and debt collection.
Negotiate payments during the last week of the month.
Collectors and their managers have sales quotas just like used car salesmen. They often accept lower offers in complete satisfaction of your debt to make their sales quotas or to bump their commission checks to the next level. Take advantage of that.
If you get sued by a collections firm, find an experienced credit card litigation attorney.
Most collections lawsuits are won and lost based on three (3) basic issues: 1.) Can the collection company adequately prove they own your account; 2.) Can the collector reasonable provide evidence that the amount that they are attempting to collect is the amount actually owed by the debtor; and, 3.) has the statute of limitations run on this account. The right attorney will understand your case quickly and know how to defend it relatively easily. If not, he can recommend a reasonable alternative to litigation.
The Monkey’s post The Three Most Powerful Words in Credit Repair is a must read before getting into the trenches with any collector. https://creditmonkey.pro/the-three-most-powerful-words-in-credit-repair/. It suggests what you should ask for when you negotiate.
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Hello, I just wanted to say that I found this article really helpful. Thank you!
Thank you. I thought I would get time to write more during COVID. Instead, I had less opportunity to write for Credit Monkey because I agreed to write legal documents and as a ghost writer for a few other blogs. I am finally getting back my time and return to writing for Credit Monkey.