When you default on a debt, your creditor has several options. They can try to get you to pay, they can sell the debt to a collection firm, or they can just write it off. Of course, they also have the option of suing you for the defaulted amount plus additional fees. But, how long can they, or the collection agency who collects on your debt, go after you for the money?
Collection agencies like new debt. If they can get debt that was defaulted on within the last 180 days, they will have a very high probability of contacting you for payment. When they buy the debt, they get the most recent phone numbers, address, your social security number, and any other information the lender feels is important. They may even get original signatures or paperwork showing that you agreed to the terms of service and are legally liable for the debt.
When the collector gets a hold of your file, they start pursuing it immediately. You will get letters, phone calls, and a nagging suspicion that every time your phone rings, it will be someone wanting the contents of your wallet. The fresher the debt, the harder they work, because they know where to find you.
After a period of time, generally 9 months to a year, the debt starts to be come known as ‘stale’. This debt is much harder to collect on. Someone who has defaulted on a loan or credit card probably has defaulted on others, and may have faced eviction or has moved to try to find work. Their phone numbers probably don’t work, the address is invalid, and the debt collector has to work harder to find them (see CC2: How Debt Collectors Find You). This debt, when purchased, has a much lower return than does fresh debt. Because of that, it is substantially less expensive than fresh debt for a collection agency to buy.
Older still is out-of-statute debt. From a legal standpoint, each state has rules about how long a person can be sued by a collection agency to try to collect debt. When the debt passes a certain number of months or years after the initial default, the collector can no longer sue you for it. That is why they often sue in the few months before debt goes out-of-statute. Once the suit is filed, it won’t matter how long you wait. There is no time limit after filing. Before filing, however, they have limited time.
Out-of-statute debt is very hard to collect on. However, since it is so cheap, it takes very few collected dollars for a collection agency to make a profit. They may, depending on your initial contract, also be able to try to collect on interest at the default rate. So it takes very few payments to make these folks feel wealthy. Since the time period varies for this debt, you should be familiar with your state’s laws regarding collections. Texas is among the most favorable to the debtor at 2 years, and Ohio is one of the strictest at 15 years.
The bottom line, however, is that there is no time limit for them to try to collect. There is a time limit for suing you, but they can call you forever.
One final note about this subject: If you respond to a collection agency by making a payment or by writing a letter, the clock starts ticking again for out-of-statute collections. At that point, they can sue you again, as long as the original time period for out-of-statute has not elapsed. And if you want the calls to stop, you need to learn your rights under the Fair Debt Collections Practices Act (FDCPA).
Showing posts with label collector. Show all posts
Showing posts with label collector. Show all posts
Tuesday, March 4, 2008
Sunday, March 2, 2008
How Does A Debt Collector Find Me?
Debt collectors are a smart group of people. They know if they want to find you so they can collect from you, they are going to need to get creative.
You see, the average debtor is a fairly mobile person. They open an account, and when they move they never send a new address to their creditor. So, the creditor has an old address, phone number, and other information.
Trust me, this doesn’t even slow a collector down! They will be hot on the trail of a debtor just as soon as they buy the debt. And they have a bunch of tools at their disposal. Unlike a few years ago when the collector only had information from the original creditor and perhaps a credit report, they now have a huge amount of information at their fingertips through the modern marvel, the Internet.
While a collection agency has many ways to track you down, here are a few that work really well for them:
1) Public records – It’s true, they can see what you do. If you buy a house, or file taxes, or open a business, they will know of it quickly. A typical collections agency will do a monthly sweep of all accounts through a computer process, and will see what data is available during that sweep. If, as an example, you buy a new house, they will see that and have your new address. Bingo, they got you! Interestingly, even 1099 information for a business is online, so that can be checked to see if you own a business. There are many other pieces of information they can check, but this is a great starting point for them.
2) Lexis / Nexis – Lexis, and other firms, provide information about pretty much everyone to you if you can pay for it. They have current and previous addresses, phones, job information, family information, and probably even your blood type. A few years from now they will probably keep a piece of your DNA! Collectors pay less than $30.00 per month for unlimited service, and they do take advantage of the service whenever they can. A lot of information comes back in a very short amount of time, and they can find you quickly.
3) Skip Tracing – This refers to hiring an outside vendor to find information about a debtor. A skip tracer will do all the leg work for you, and come back with a summary report telling you where a debtor is. If the first skip tracing firm is unsuccessful, they may use another to search again. This is highly cost effective, and highly automated.
4) Calling people you know – This is vicious, but it really works. Lexis, and other vendors, have a list that they call “nearby’s”. Let’s say you had a house at 123 Elm. They know who lives in 122 Elm, 124 Elm, and other surrounding houses. They have the names and phone numbers for each of those homes. So, the collector will call, and try to get a forwarding address, or a new phone number, or any other information they can get. They will also call relatives, friends, and anyone else that is shown to be an associate of the debtor.
5)) TransUnion – A fairly new TransUnion service will allow you set a watch on a credit file, and if a new entry comes in, say from a new credit card company with whom the debtor has opened the account, TransUnion will determine the address for the account and send it to the collectors. This is a great way to track people down, but may have some legal privacy flaws before everything works out.
This is just a few of the ways collectors can find you. They have a bunch of additional tricks up their sleeves, and more than likely they WILL find you. So, how do you hide? You can’t, unless you can find a way to hide your personal information from every source on the Internet. Instead, you just have to be prepared for the worst, and make sure you can deal with the collectors if they finally do call.
You see, the average debtor is a fairly mobile person. They open an account, and when they move they never send a new address to their creditor. So, the creditor has an old address, phone number, and other information.
Trust me, this doesn’t even slow a collector down! They will be hot on the trail of a debtor just as soon as they buy the debt. And they have a bunch of tools at their disposal. Unlike a few years ago when the collector only had information from the original creditor and perhaps a credit report, they now have a huge amount of information at their fingertips through the modern marvel, the Internet.
While a collection agency has many ways to track you down, here are a few that work really well for them:
1) Public records – It’s true, they can see what you do. If you buy a house, or file taxes, or open a business, they will know of it quickly. A typical collections agency will do a monthly sweep of all accounts through a computer process, and will see what data is available during that sweep. If, as an example, you buy a new house, they will see that and have your new address. Bingo, they got you! Interestingly, even 1099 information for a business is online, so that can be checked to see if you own a business. There are many other pieces of information they can check, but this is a great starting point for them.
2) Lexis / Nexis – Lexis, and other firms, provide information about pretty much everyone to you if you can pay for it. They have current and previous addresses, phones, job information, family information, and probably even your blood type. A few years from now they will probably keep a piece of your DNA! Collectors pay less than $30.00 per month for unlimited service, and they do take advantage of the service whenever they can. A lot of information comes back in a very short amount of time, and they can find you quickly.
3) Skip Tracing – This refers to hiring an outside vendor to find information about a debtor. A skip tracer will do all the leg work for you, and come back with a summary report telling you where a debtor is. If the first skip tracing firm is unsuccessful, they may use another to search again. This is highly cost effective, and highly automated.
4) Calling people you know – This is vicious, but it really works. Lexis, and other vendors, have a list that they call “nearby’s”. Let’s say you had a house at 123 Elm. They know who lives in 122 Elm, 124 Elm, and other surrounding houses. They have the names and phone numbers for each of those homes. So, the collector will call, and try to get a forwarding address, or a new phone number, or any other information they can get. They will also call relatives, friends, and anyone else that is shown to be an associate of the debtor.
5)) TransUnion – A fairly new TransUnion service will allow you set a watch on a credit file, and if a new entry comes in, say from a new credit card company with whom the debtor has opened the account, TransUnion will determine the address for the account and send it to the collectors. This is a great way to track people down, but may have some legal privacy flaws before everything works out.
This is just a few of the ways collectors can find you. They have a bunch of additional tricks up their sleeves, and more than likely they WILL find you. So, how do you hide? You can’t, unless you can find a way to hide your personal information from every source on the Internet. Instead, you just have to be prepared for the worst, and make sure you can deal with the collectors if they finally do call.
Saturday, March 1, 2008
Why Collectors Are Buying Old Debt
It’s happening a lot now. An account you had forgotten about, from a different time in your life, suddenly shows up again as a Dunning Letter from a collection agency. You vaguely remember the address, and you are pretty sure you paid that off, but that was 15 years ago! It was your debt, but you don’t have records that far back. Why are they bugging you now?
The game has changed. There is old debt out there worth tens of billions of dollars that was believed to be un-collectable. In other words, the utility company didn’t know how to find you, so they never pursued the debt. This debt is very cheap to buy, and the fact is that a very small number of collections against it can generate large rewards for the collection agency, so they are willing to put in the time and effort to try to get a bbit of cash out of you.
Some collectors are unscrupulous (comes as a surprise, doesn’t it?), and don’t care who they collect from. They might add a negative to someone’s credit report even if they can’t verify the owner of the account. In that case, they are hoping the innocent victim will pay for a deletion of the account rather than take the time to fight it. In many cases, this is the cheapest way to go.
But again, why bother? Well, the original creditor wrote the debt off years ago. Now they see a way to make some cash back. So, they cell their debt for 3 or 4 cents on the dollar. Look at the benefit to the collector. They buy a million dollars worth of debt for, say, $40,000.00. Over a period of a month, they are able to bring in 10 percent, or a hundred thousand dollars. They make HUGE profits on a very few wins.
So, how do they prove the debt is yours? Well if the original creditor has a paper trail showing this is your debt (usually by a matching SSN), you are stuck. But often, they have no paper that proves the debt is yours. So, you can contest it, they can’t prove it, and by law they have to delete it from your credit report.
However, they often don’t delete it. They will change something, like the date reported, or the amount, but won’t delete the negative. And unless you act, they will have 7 years (in most states) that the debt will show up on your report.
What can you do? If this happens to you, the first thing to do is send a letter demanding proof. Not that they verify the debt, but that they prove it is yours. If they can’t prove it, you have a case against them.
The second thing is to call the original creditor and explain the situation. They may have simply made a mistake, and might be able to help you out.
Your next step is to dispute with a credit bureau. If you do that, the bureau has 30 days by law to respond, and if they get no proof they have to delete the data from their credit reports.
The point is, you need to do something. Check your reports, and take action against the bad. If you do that, your reports will improve, and you will save money over the long run.
The game has changed. There is old debt out there worth tens of billions of dollars that was believed to be un-collectable. In other words, the utility company didn’t know how to find you, so they never pursued the debt. This debt is very cheap to buy, and the fact is that a very small number of collections against it can generate large rewards for the collection agency, so they are willing to put in the time and effort to try to get a bbit of cash out of you.
Some collectors are unscrupulous (comes as a surprise, doesn’t it?), and don’t care who they collect from. They might add a negative to someone’s credit report even if they can’t verify the owner of the account. In that case, they are hoping the innocent victim will pay for a deletion of the account rather than take the time to fight it. In many cases, this is the cheapest way to go.
But again, why bother? Well, the original creditor wrote the debt off years ago. Now they see a way to make some cash back. So, they cell their debt for 3 or 4 cents on the dollar. Look at the benefit to the collector. They buy a million dollars worth of debt for, say, $40,000.00. Over a period of a month, they are able to bring in 10 percent, or a hundred thousand dollars. They make HUGE profits on a very few wins.
So, how do they prove the debt is yours? Well if the original creditor has a paper trail showing this is your debt (usually by a matching SSN), you are stuck. But often, they have no paper that proves the debt is yours. So, you can contest it, they can’t prove it, and by law they have to delete it from your credit report.
However, they often don’t delete it. They will change something, like the date reported, or the amount, but won’t delete the negative. And unless you act, they will have 7 years (in most states) that the debt will show up on your report.
What can you do? If this happens to you, the first thing to do is send a letter demanding proof. Not that they verify the debt, but that they prove it is yours. If they can’t prove it, you have a case against them.
The second thing is to call the original creditor and explain the situation. They may have simply made a mistake, and might be able to help you out.
Your next step is to dispute with a credit bureau. If you do that, the bureau has 30 days by law to respond, and if they get no proof they have to delete the data from their credit reports.
The point is, you need to do something. Check your reports, and take action against the bad. If you do that, your reports will improve, and you will save money over the long run.
Friday, February 29, 2008
The Top 5 Reasons To Check Your Credit Report
I check my credit scores and reports once a week. For a while, I checked daily, but that seemed a tad excessive. OK, maybe it was seriously paranoid. Alright, fine, I basically did nothing else. I went crazy. I wanted my reports CLEAN!
It’s true, I was in the process of cleaning my credit reports up. I spent a lot of time and a lot of effort learning how to get that done. And after I had reached my goals, I got kind of sick of it. Always trying to figure out what had changed, what was good, and what was bad. Not an easy task.
So, for a couple of months, I quit watching. Just let it go, pay your bills on time, and kind of relax. Then I got the letter…
Yep, Equifax wanted me to know that there had been a negative on my report. A collection agency had reported to my credit report for someone else’s utility bill in another state. I had never lived in that state, or gone by that name, but they accused me. So, I pulled my credit.
It wasn’t just one. I had three new negatives on my report. One, as I mentioned, wasn;t mine. The other two were. But, they were old! Also paid for, but that didn’t matter. One was a car loan I had paid in full 8 years earlier. The other was for a traffic ticket I actually contested in court. Since I had a copy of the car title, and could get a copy of the court record, those were easy to fix. They went away in a couple of months. But the other, the false claim, took 6 months and the threat of legal action before the collection agency would back off.
At the time it happened, it didn’t really matter. I was in good shape financially, and didn’t need to buy anything on credit. But what would it have been like if I was trying to buy a car, or a house? I wouldn’t have been able to. And, by the way, my credit scores went down by 110 points.
So, now I check once a week. If something shows up, I want to know about it. More than that has no purpose, and longer doesn’t give me the reaction time I need. But, it isn’t just about the invalid credit reporting. There are actually some really good other reasons as well:
1) It is an easy way to detect identity theft. If someone gets a hold of your SSN, in example, and opens a credit account, you will see it quickly and can get it cancelled before they do damage.
2) It is a great way to see who is checking you out. Any pull against your credit reports will show up as an inquiry. It is always nice to know that someone has done that illegally.
3) Your creditors may do something wrong. They have good intentions, but showing you as late, even once, can cause a 60 point drop in your scores.
4) Bad things could go away. If you have had late payments, collections, or defaults in the past, they will fall off over time. If you are actively working on the problems, they might go away much sooner. And THAT is a good feeling.
5) Because it is still kind of fun!
Credit is still kind of a big game to me. The rules are vague, and if you play hard you can win.
My recommendation? Buy into a service that let’s you check your credit, and use it. Over time, it can save you a ton of money, and a ton of time.
It’s true, I was in the process of cleaning my credit reports up. I spent a lot of time and a lot of effort learning how to get that done. And after I had reached my goals, I got kind of sick of it. Always trying to figure out what had changed, what was good, and what was bad. Not an easy task.
So, for a couple of months, I quit watching. Just let it go, pay your bills on time, and kind of relax. Then I got the letter…
Yep, Equifax wanted me to know that there had been a negative on my report. A collection agency had reported to my credit report for someone else’s utility bill in another state. I had never lived in that state, or gone by that name, but they accused me. So, I pulled my credit.
It wasn’t just one. I had three new negatives on my report. One, as I mentioned, wasn;t mine. The other two were. But, they were old! Also paid for, but that didn’t matter. One was a car loan I had paid in full 8 years earlier. The other was for a traffic ticket I actually contested in court. Since I had a copy of the car title, and could get a copy of the court record, those were easy to fix. They went away in a couple of months. But the other, the false claim, took 6 months and the threat of legal action before the collection agency would back off.
At the time it happened, it didn’t really matter. I was in good shape financially, and didn’t need to buy anything on credit. But what would it have been like if I was trying to buy a car, or a house? I wouldn’t have been able to. And, by the way, my credit scores went down by 110 points.
So, now I check once a week. If something shows up, I want to know about it. More than that has no purpose, and longer doesn’t give me the reaction time I need. But, it isn’t just about the invalid credit reporting. There are actually some really good other reasons as well:
1) It is an easy way to detect identity theft. If someone gets a hold of your SSN, in example, and opens a credit account, you will see it quickly and can get it cancelled before they do damage.
2) It is a great way to see who is checking you out. Any pull against your credit reports will show up as an inquiry. It is always nice to know that someone has done that illegally.
3) Your creditors may do something wrong. They have good intentions, but showing you as late, even once, can cause a 60 point drop in your scores.
4) Bad things could go away. If you have had late payments, collections, or defaults in the past, they will fall off over time. If you are actively working on the problems, they might go away much sooner. And THAT is a good feeling.
5) Because it is still kind of fun!
Credit is still kind of a big game to me. The rules are vague, and if you play hard you can win.
My recommendation? Buy into a service that let’s you check your credit, and use it. Over time, it can save you a ton of money, and a ton of time.
Thursday, February 28, 2008
Why Do We Need Credit Education?
I was thinking about the credit crisis in the US today, and I think the experts are wrong.
When you read about the problem, the concensus seems to be that we use charge cards too much, that the government is encouraging the public to spend through lower interest rates rather than save money for the future. We read of evil banks, dishonest mortgage companies, and credit card companies charging outragous fees, all trying to take your hard-earned money away from you.
Then, as soon as we get in trouble with credit, we have someone bail us out. Credit counseling companies, bankruptcy courts, even the government trying to make sure that your mortgage doesn’t get called in. And as soon as one problem is fixed, we go out and make it worse by charging something else.
Now, don’t get me wrong, I believe in credit. When you are buying a house or car, I think credit is a great thing, as it allows you to extend your earning power to buy something you otherwise wouldn’t be able to get. I also think a credit card is great if used properly. If you are travelling, or have a sudden problem crop up, credit is a wonderful thing to have. But most of us don’t stop there. We buy expendable goods (Food with credit? Yep, GREAT decision!), so that the price of an item is severely inflated. We charge way more than we can possibly pay back in a timely fashion. And then, when we are paying hundreds of dollars a month in interest, we wonder how we got into this position!
Indeed, I think the experts are wrong. They blame financial institutions, or the government, but the real culprit is a lack of credit education.
I’m 42 years old. When I went to high school, they taught me how to balance a check book. I have a kid in high school. He just learned the same thing. Now, honestly, how many people do you know that still write checks? I don’t even know where my check book is! And even if I did, my debit card is just too handy.
So we sit here handing out credit cards to young adults in college, and they have no idea what an interest graph looks like. Or that interest is usually paid first on a loan. Or that a missed payment increases your rates. They don’t get it!
When I was 21, I got married. Prior to that, I lived in a house with an under-the-counter fridge, a pot, a skillet, and a chair. I was pretty well off! Then, my new bride moved in. Wierdly, she wanted cold food and clean clothes! Women…
So, off we went to Sears, where, wonder of wonders, they gave us CREDIT! We got a fridge, a couch, and a washer and dryer. Just 21.99% interest! Only going to take 5 years to pay off! FREE for 90 days!
My credit debt outlived the couch. It nearly outlived the marriage. But, I learned the hard way.
If only our kids didn’t have to do that.
When you read about the problem, the concensus seems to be that we use charge cards too much, that the government is encouraging the public to spend through lower interest rates rather than save money for the future. We read of evil banks, dishonest mortgage companies, and credit card companies charging outragous fees, all trying to take your hard-earned money away from you.
Then, as soon as we get in trouble with credit, we have someone bail us out. Credit counseling companies, bankruptcy courts, even the government trying to make sure that your mortgage doesn’t get called in. And as soon as one problem is fixed, we go out and make it worse by charging something else.
Now, don’t get me wrong, I believe in credit. When you are buying a house or car, I think credit is a great thing, as it allows you to extend your earning power to buy something you otherwise wouldn’t be able to get. I also think a credit card is great if used properly. If you are travelling, or have a sudden problem crop up, credit is a wonderful thing to have. But most of us don’t stop there. We buy expendable goods (Food with credit? Yep, GREAT decision!), so that the price of an item is severely inflated. We charge way more than we can possibly pay back in a timely fashion. And then, when we are paying hundreds of dollars a month in interest, we wonder how we got into this position!
Indeed, I think the experts are wrong. They blame financial institutions, or the government, but the real culprit is a lack of credit education.
I’m 42 years old. When I went to high school, they taught me how to balance a check book. I have a kid in high school. He just learned the same thing. Now, honestly, how many people do you know that still write checks? I don’t even know where my check book is! And even if I did, my debit card is just too handy.
So we sit here handing out credit cards to young adults in college, and they have no idea what an interest graph looks like. Or that interest is usually paid first on a loan. Or that a missed payment increases your rates. They don’t get it!
When I was 21, I got married. Prior to that, I lived in a house with an under-the-counter fridge, a pot, a skillet, and a chair. I was pretty well off! Then, my new bride moved in. Wierdly, she wanted cold food and clean clothes! Women…
So, off we went to Sears, where, wonder of wonders, they gave us CREDIT! We got a fridge, a couch, and a washer and dryer. Just 21.99% interest! Only going to take 5 years to pay off! FREE for 90 days!
My credit debt outlived the couch. It nearly outlived the marriage. But, I learned the hard way.
If only our kids didn’t have to do that.
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