Posted by Mitch Mitchell on Dec 12, 2007
And now, the first real post. This is informational, and it could help a lot of people.
Many people have had at least one credit card or something go to a collection agency. Sometimes it’s legitimate, sometimes it’s not. However, we’re going to talk about the legitimate ones here for a minute.
Here’s the deal. Credit card companies, or whomever else, will do what they call a “charge off” of the outstanding amount you owe on a claim. When you fall behind on your payments, they attach all these fees and the like, but when it finally gets reported to the credit reporting companies, the amount they’re allowed to charge off is the actual amount you owe, not all those fees. So, if you owed them $2,000, even if they tacked on $1,000 worth of fees, they can’t report all that.
Why is it important? Because they have these collection agencies known as “scavengers“, that buy all this debt at between 5 and 8 cents on the dollar, look at what the amounts were with all the interest, then start pounding your phone trying to get you to start paying on all of that. Thing is, if you make even one payment, or agreement on that amount, by law you now are responsible for all of it. If you don’t, as in you’ve checked your credit report and know what the charge off amount was, you can get them to either start negotiating from that point, or only pay them based on that amount, which will still be thousands less in many instances.
They don’t want you to know this, obviously, but I’m telling you how it is. If you want more information on it, read the Fair Debt and Credit Collections Act; it’s there for your protection. Make sure to always know your charge off amounts; you could save a lot of money on the back end.