Charge Off/Charge Back/Secondary Credit Agencies
I spent the night, last night, in serious contemplation about my life, where I am going, what I plan on doing, and the money issues that seem to surround my, almost, every move. For example, as a young adult I was offered a credit card. That card meant freedom; it also meant a level of responsibility that I, at the time, was not ready for. As a result of the lack of personal preparedness I found myself very much in debt and growing deeper and deeper in debt as I struggled to dig my way out of the issues I faced. The struggle has taken almost ten years. Lots of things in my life seem to surround the number ten.
It took ten years to get into BYU or a church sponsored school. It took ten years for me to come to terms with parts of my mission and my life. It took ten years before Ive really started to feel as though I could settle down somewhere (though Utah is not that somewhere).
Ten years is a long time to wait for things to happen; and yet, wait I have because there has been little or no choice.
Part of the reason I was up so much during the night was because of a phone call I received yesterday afternoon. It was the owner of the debt Ive been trying to eradicate. Three or four years ago the company sent me letters that wouldve allowed me to exonerate the debt at a rate of 20% of what I owed. To date I have paid between 79 and 81% of the total. Still, as I sat and went through the short conversation with the individual on the other end of the line I received the impression that he didnt care one whit about whether or not I could afford to make the level of payments I have, historically, been making in the past. .
Note: the percentages and numbers I am sharing dont include additional payments Ive made at various times during the three years Ive been paying this down. The overall debt reduction can be as high as 85% of total single debt load.
At about three in the morning I discovered that, because of finances, I couldnt sleep. Not because I was worried about where money would come from, but as a result of the idea that this new individual would stoop to the kinds of tactics that he went through to get me to pay a set rate. I guarantee you that there were a couple of factors involved in the conversation. One, he had a quota to meet to get a bonus; and two, he didnt want to take the time to put numbers into his computer to see what would be allowable based on whatever equations and numbers they use to make a decision on the lowered amount that I will pay.
The result was about four hours, this morning, of research into secondary creditors, debt relief, charge backs as opposed to charge offs, and what the law allows me to do in relation to the company and their tactics. This gentleman walked a fine line, in my estimation, on breaking the law in order to get me to pay a certain amount; however, he didnt cross the line and break any laws or rules. Still, there are a lot of laws out there that protect the consumer from aggressive debt collectors. Apparently the industry grew from 1.1 million about ten years ago to a multi-billion dollar a year industry. With many companies using rather shady tactics to get people to pay money so they can make a massive profit off of a small investment.
The entrepreneur in me thinks, Why dont I start a company like this? and then I realize that it goes against my better judgment, my ethos, my feelings of personal worth you name it, the very notion of the industry is something that sickens me regardless of the amount of overall profit that it can generate.
Still, the company that owns my debt is a pretty good company. It was started by two brothers who leveraged themselves through credit cards about 11 years ago to start their company. And then, they started it in a basement. Pretty gutsy. But a move that paid off more than a thousand-fold as they are one of the top companies for debt recovery in the nation.
Still, that wasnt enough. Knowing whom I am speaking to (company-wise) is good but its just not enough. There was a notion that I didnt quite understand charge backs as opposed to charge offs and somehow the difference was important. My initial search was on charge backs which, it turns out, is the industry term for what the consumer does when disputing a charge on the credit card. Basically, the business loses the charge amount and the consumer credit card is credited with said amount. There are now entire industry and credit reporting bureaus that surround charge backs to help protect the business.
Which then led me to an area of the federal code on Credit Collections Protection. Charge Offs are on the company side where money was lent and not paid back. A charge off is a tactic used by the company to record realized loses in capital, get a tax write-off in the year of the charge off, and then sell the debt for pennies on the dollar. In essence a debt load of 10,000 can be had for close to 1000. Debts are not sold individually, they are sold collectively.
Most of these companies operate on a principle of recovery. In a sense, they have a break-even point where money collected is profit and they are willing and capable of writing off remaining balances because theyve collected earnings. In my case, they have been collecting earnings over debt for about two to two and half years based on industry norms and standards. Pretty amazing. Like I said, if I had no scruples this would be the industry to get into
What caught my attention somewhere between 3 a.m. and 7 a.m. is that I have now paid twice the amount of money I originally borrowed. Quite possibly more as I didnt really bother to keep concise records back in the heyday. Its quite sickening to think this debt load has been hanging over my head for this long. If I knew then what I know now I wouldnt have allowed myself to get caught in this trap.
However, when a charge off occurs, credit reporting agencies are required to keep a record of it for seven years. This is the only reporting that can take place on the debt. Original creditor and no other. Therefore, regardless of my intentions when it comes to the money, the charge off remains on my record until sometime in 2008. According to Transunion the discharge date will be around 10/2008. The other sites did not offer when the discharge from my credit report will take place; however, since the date is based on the last payment made to the original creditor, I would imagine that the discharge will be the same, or thereabouts, for all three reporting agencies.
Regardless, the law allows someone like me to stop answering the phone and, if necessary, to send a letter of intent for the company to stop contacting me and they have to stop. Basically, the contact allowed to a secondary debt company is very limited and, as such, they have very little recourse. This does not mean that they cant take their recourses. For example, they can sue. However, the cost of a law-suit would exceed the recovery cost and, according to the myriad websites I ended up reading (and some articles and the actual laws) the chance of a lawsuit diminishes based on location of collecting agency, individual (suits have to be filed in state where the debtor resides) and the outcome is a settlement for significantly less or the selling off of debt to another company.
Moreover, these companies are only allowed to contact persons of interest (e.g. family members) once to try and ascertain a phone number or address to forward correspondence in couping debt. In short, a changed cell phone number, an unlisted address or a change of location, and it becomes very easy to disappear. However, the drawback is that if the debt is sold, and sold again, new companies can make that one phone call and attempt to be paid on the debt.
Debt never goes away. That is one of the tenets of recovery companies. However, there are protections under the law that allows the consumer, the debtor, to stop harassment and to maintain standard of living while attempting to recover their lives and credit score. A charge off will affect your ability to get a credit card (I have my first one with a very small balance in a lot of years) but, when all is said and done, there comes a statute of limitations where no agency can force you to pay back the money. Sure, the dollar amounts exist on ledgers somewhere, but they are unenforceable based off of state laws and legislative action.
Not that people want to get away from their debt, but sometimes, I think, you have to forget yourself and walk away from those who would affect standard of living. In my case, and I am not saying I am doing this yet, I have aggressively paid the debt and done a Herculean job, I think, of getting rid of it. However, in current circumstances, I believe it is reasonable to request that someone I am not even legally obligated to deal with work with me on payments so that I am not forced to stop what I am doing in order to pay bills where I would have more money to pay them, maintain standard of living (estimates based off of current research into college graduates), and find myself in a marketable position; it doesnt make sense to allow someone, or even an entity, to dictate how I live my life.
Granted, a lot of what I am doing is knee-jerk. I am upset. I believe that the way the payments have been handled over the past several months has been rather poor and the person they have working the phones is not the best person for the job or to deal with the public (or me), but the outcome is, and will be, the same. The debt will go away one way or another. Either I come up with a way to come to a settlement or I will have it paid off. In either case, the debt is going away very soon.