by admin | Dec 1, 2018 | Creditors and Collections
GC Services is notoriously known throughout the debt-collection industry. They’re arguably one of the biggest collection agencies in the world. They’re often the mouthpiece or middleman for companies in many different industries such as retail, traffic, and automotive. But, they’re most known for collecting student loans. Once one of these companies has spent a while trying to collect a debt from you, they might hire a third-party, such as GC Services, in order to pursue their debts for them. But, it’s important to understand the history of this company and the things that they have been accused of in the past.
GC Services currently has over 8,500 employees all across the United States and the Philippines. The company is based in Houston, Texas, but it also outsources much of their business overseas. They deal with both first-party and third-party debts. This means that they’ll often deal with debtors that have a delinquent account and those who have a defaulted account as well. They allegedly have 60 years of business experience and call themselves, “the largest business process outsourcing providers in the U.S.” But, even though this company boasts many successes, their name has been a hot topic in the news because of their FDCPA (or, Fair Debt Collections Practices Act) violations.
If you aren’t too familiar with the FDCPA, it contains rules and guidelines that debt collectors have to abide by. They’re designed to protect you as a borrower and keep you away from harassment and abuse. However, every so often, collection agencies violate the law, forcing consumers to seek litigation against these agencies to protect their rights and enlist the help of a credit repair company in Houston, or various cities around the country.
Recently, GC Services has become a hot new topic because of a hefty $700,000 fine to settle a lawsuit that alleged that the company was engaging in illegal and invasive debt collection practices. The company did not confirm or deny any wrongdoing, but it did agree to pay the fine to the FTC. The lawsuit mentions that GC Services repeatedly called third parties (family, neighbors, etc. of the borrower) even after being told that they have the wrong person. The lawsuit even alleges that GC Services said that they would stop calling them and falsely take steps in order to remove the third party’s phone number. Under the FDCPA, debt collection agencies are only supposed to call third parties once.
Also, the lawsuit alleges that GC Services revealed consumer debts in voicemail. Another person, who wasn’t the consumer, ended up hearing these voicemails. That again is in violation of the FDCPA. In the lawsuit, the debt collection company proclaimed that collected approximately $1.4 billion in gross collections from consumers in 2014. Also, the lawsuit stated that in that same year they had gross revenues of approximately $133 million.
This company also deals with a variety of customer complaints. According to the Better Business Bureau (BBB), there have been 111 closed customer complaints over the past three years. 25 of those complaints have been closed over the past twelve months. There are also currently 13 customer reviews on the company’s BBB profile, aggregating into a score of one star. On the other hand, the company currently has an A rating with the BBB. The percentage of consumers that have a problem with GC Services tends to make their voices heard in any way that they can. GC Services has an often bad reputation with the consumers they deal with, but they still maintain a high level of success in the industry.
Dealing With Harassment
If you’re currently dealing with a debt collection company such as GC Services, then it’s important to know your rights as a borrower. The FDCPA was put into place in order to protect borrowers from the predator like behaviors that debt collectors often exhibited, like GC Services, in order to collect the debts.
If you’re experiencing any of these abusive behaviors from debt collectors, you should seek help:
– Receiving calls at work
– Receiving late night or early morning calls
– Receiving multiple calls per week
– Collectors are threatening you with violence
– Collectors are proclaiming that you owe more than you think
– Use of obscene or explicit language
When a debt collector exhibits any of these behaviors, it means that they are breaking the law. There are steps that you should partake in order to have the best chance of proving your case if need be. First, it’s best to contact the debt collection agency (whether verbally or in writing) to stop contacting you. By law, they should abide by your request. If they haven’t stopped contacting you, it’s best to record all of the illegal behavior. This ensures that you’ll have the information to backup your claims. Next, you can send complaints many different ways including the Federal Trade Commission and to your state’s attorney. Representatives from these camps will be able to give you all the information you need in order to make the next step in your case. You don’t deserve to be treated unfairly by debt collection agencies like GC Services. Knowing your options as a borrower will ensure that you’re treated with dignity and respect.
by admin | Nov 21, 2018 | Creditors and Collections
As a borrower, it’s important that you are aware of the ways that you should be treated by debt collectors. There are governmental rules and regulations that are set up in order to protect you from being harassed by debt collectors and collection agencies. If you are being treated in any of the following ways, then you have the option of alerting the authorities and taking that next step. Read on to find out more about the Fair Debt Collection Practices Act and how you should be treated as a borrower.
First, it’s important to know what types of debtors that the FDCPA covers. If you’re dealing with third-party debt collectors, such as student loans, mortgage loans, or auto loans, then you’re covered. If you’re dealing with loans from another person, like business loans, then you aren’t going to be covered by the Fair Debt Collection Practices Act. Essentially, the FDCPA deals with business to debtor interactions. Companies like Transworld Systems and Midland Credit Management typically fall under this category.
What is Considered Harassment?
There is a time and a place for calls about your debt, and the FDCPA writes that out clearly. Debt collectors can’t call borrowers before 8 A.M. or after 9 A.M unless the borrower has previously confirmed that this is the time that they wanted them to call. Debt collectors can call you at your home or office. But, if you tell the debt collector verbally or in writing that they can’t call your job, then they have to abide by your wishes. Also, if the debt collector doesn’t have contact information on the borrower, then they have the right to call neighbors or relatives to find out that information. But, they can’t give any information about the bill or reveal the fact that they are calling from a debt collection agency. This leads to the fact that they can only discuss your debt with your or your spouse. If you have an attorney that’s representing you in this matter, the debt collector can speak to them about it as well.
Also, debt collectors cannot use or threaten violence in order to collect a loan. They can’t use profane or offensive language. Lying is completely out of the question. They can’t tell you that you owe more than you do. Also, they can’t misrepresent themselves and call themselves attorneys or police officers when they’re not. They also can’t threaten to sue you unless they are actually planning to take that action towards you. All of these actions are thought of an intimidating the consumer.
What is Fair?
Within five days of the first contact, the debt collector is obligated to send you a validation notice. This notice has to have three key pieces of information: how much money that you owe, the person that you owe it to, and what to do if you don’t think that it’s your debt. If you don’t think it’s for you, you can send a letter within 30 days of receiving the verification notice. Then, the debt collector has to send written proof of your debt, like a copy of your bill. The debt collector can contact you in a variety of different ways including by phone, email, mail, and text messaging. If you don’t want to the debt collector to contact you, you have the option of sending a letter by mail and requesting that they stop. Legally, the next time that they contact you will either to confirm that they’ll stop contacting you or that they’ll be taking a step forward (filing a lawsuit, etc.)
Also, in many states, there’s a statute-of-limitations that debt collectors have to abide by when it comes to contacting you about your debt. The time-limit usually begins when you fail to make a payment on one of your loans. Once a debt is a certain amount of years old, it becomes time-barred. But, the rules concerning statute-of-limitations vary in each state and it’s important to research your state’s particular rules before making a move.
Reporting Illegal Activity
If you encounter any illegal activity, then there are a couple of places that you can get in contact with. This includes the Federal Trade Commission, the Consumer Finance Protection Bureau, or your state attorney’s general office. Your laws vary by state, but getting in contact with your state attorney would be the best bet in order to fully abide by state laws and avoid wasting your time.
You can also sue the debt collector within one year that the law was broken. But, it’s important to know that even if you encounter your debt collector engaging in illegal activity, you still have to repay the debt regardless.
Dealing with debt collectors can be a very frustrating and time-consuming experience. But, becoming aware of the Fair Debt Collection Practices Act, ensures that you know your rights. You then can be aware of any illegal activity and make sure that you’re being treated fairly and honestly by debt collectors.
If you are being contacted by a debt collector or need help rebuilding your credit, The Phenix Group is here to help. We can help you fix your credit scores and achieve financial security through our attorney-engaged credit repair process. Get in touch with us today at (972) 630-6112 for a free consultation!
by admin | Oct 1, 2018 | Creditors and Collections
Dealing with debt collections can be scary, especially if you’ve never experienced the stress of letting a credit account go delinquent. Debt collectors come with a variety of outlooks on how they should treat consumers in their efforts to collect a debt. Many are polite, professional, and communicate clearly all options available to you. Many are not so polite, not so professional, and don’t communicate options very well at all.
All debt collectors, however, are subject to restrictions listed under the Fair Debt Collection Practices Act (FDCPA) that requires them to behave in above board practices when attempting to collect a debt. While many collection agencies adhere to these requirements strictly, there are some debt collectors that seem to walk the line between above and below board.
Transworld Systems is one such company. Besides the countless complaints about Transworld over the past decade, this company has found itself butting heads with the Federal Trade Commission (FTC). The FTC ended up issuing a fine to Transworld Systems parent company, Expert Global Solutions, in the amount of 3.2 million dollars.
The premise behind the fine was that Transworld was giving personal consumer information out to third parties that were not one of the credit bureaus, harassing consumers over the phone, and ignoring consumer account validation requests, all of which are prohibited under the FDCPA.
The FDCPA was passed in September of 1977 in an effort to provide more protection for consumers against unfair debt collection practices. Since debtors prison was no longer an option by the 20th century, the practice of harassing and threatening consumers in an attempt to collect debt became quite common up to this point.
Since the passing of the FDCPA, those types of practices have subsided to a degree, but violations still occur on a consistent basis, and complaints are still being made against a variety of debt collectors today. While some complaint is expected, especially when dealing with such a stressful personal problem as debt collection, many of these complaints can be substantiated by the language of the FDCPA.
Under the FDCPA consumers are protected from a variety of predatory practices by collectors. Violations of these practices are prosecutable under the law.
Harassment
Consumers cannot receive robocalls or unsolicited texts on their phones by debt collectors. They cannot be subject to vulgar, offensive, or derogatory language. They cannot be sent mail that is outwardly indicative that the collection agency is attempting to collect a debt, or contain any information on the envelope that would be embarrassing for the consumer. Debt collectors cannot send postcards. Debt collectors may not call repeatedly or continuously.
Threats
Collectors may not threaten a consumer with violence. They may not threaten to take any action they don’t intend to, are not capable of taking, or don’t have the authorization to take. They may not misrepresent themselves as law enforcement, a government agency, or a legal firm if they are not.
Reasonable Correspondence
Consumers cannot be contacted at work once the consumer has indicated to the collection agency that they wish not to be. Debt collectors cannot call consumers after reasonable waking hours (before 8:00 a.m. or after 9:00 p.m.) or after hours appropriate to someone working an alternative work schedule.
Ignoring Requests
You have the right to request Debt Validation. Once you’ve made the request, the debt collector is legally obligated to send a debt validation to you in writing. This document contains all of the details of the debt for which the collection agency is pursuing you. If there are any inaccuracies or misrepresentations on this validation you have the right to dispute it.
Misrepresentation
Debt collectors cannot agree to do one thing and then do the the other. If they make a promise to clear your debt line entry from its report to the credit bureaus in exchange for settlement of the debt, then they must do so. Unless you get it in writing however, you have no proof that the agreement was ever made.
Dealing with Debt Collectors Like Transworld Systems
Despite the protections set forth by the FDCPA, violations still occur. Whether a debt collector is aware of the violations and fully engaged in the unlawful practice, or an honest mistake has occurred, you’ll need to make sure you are protecting your rights.
Put Everything In Writing
Fully record all of your correspondence with the debt collector and require the collector only communicate with you in writing. If you request a Debt Validation report, request it in writing. If you agree upon a payment settlement agreement in exchange for removal of the debt, make sure that correspondence is in writing. Discuss nothing over the phone. Having all correspondence in writing means you can prove everything you say about your experience with the debt collector.
Credit Report Disputes
Always make a Request for Validation with any new collector that comes knocking on your door within thirty days of the initial correspondence. If you do find inaccuracies, you’ll need to file a credit report dispute with each of the three credit bureaus: Equifax, TransUnion, and Experian, in an effort to resolve the mistake or remove the credit line completely from your report.
Statute of Limitations
All debt has a certain number of years before it falls off your credit report. Bankruptcies last 7 to 10 years, while foreclosures last 7 years. Some debt collectors will often engage in unscrupulous practices in order to keep your account alive, as the statute of limitations begins with the last contact with the consumer. Be aware of the statute of limitations on your debt, but don’t ignore debt that can be civically litigated against you.
If you are suffering from outstanding debt that’s gone to collections, understand your rights and collector obligations under the FDCPA before negotiating with any debt collector. Many collectors will operate in somewhat of a gray area legally to get you to pay your debt. Knowing exactly what they are and are not allowed to do will help you keep them accountable for their actions.
If you are being contacted by Transworld Systems, are in debt, or need help rebuilding your credit, The Phenix Group is here to help. We have been helping individuals fix their credit scores and achieve financial security for years through our attorney-engaged credit repair process. Get in touch with us today at (682) 710-2011 for a free consultation!
by admin | Aug 15, 2018 | Creditors and Collections
Finding yourself unable to pay bills on time can have a devastating effects both personally and financially. Once some debt goes unpaid and moves into collections, other debt tends to head in that same direction. This seems especially true when a consumer is unable to pay due to personal life events such as, loss of a job or a death in the family.
What can be even more stressful in experiencing financial hardship, is being approached by debt collectors employing every strategy they can, in an effort to collect outstanding debt from the consumer. The best tool a consumer can have to work through the circumstances of being placed in collections and contacted by collectors is knowledge – knowledge of their rights under the law, and knowledge of strategies they can use when dealing with debt collectors.
Get to Know Midland Credit Management
One such collector, Midland Credit Management, a collection agency owned by publicly traded Encore Capital Credit Group, will employ a variety of tactics to secure payment for outstanding debt. Understanding who Midland Funding LLC is and what their reputation consists of will help consumers who are forced to deal with them communicate in a way that best protects themselves.
Midland Credit Management, aka Midland Funding, has been in business since 1953, and has been on file with the Better Business Bureau (BBB) since 1992. It is based in San Diego, but like all other debt collectors, purchases debt accounts from a variety of lenders everywhere and then pursues consumers for collection of those accounts.
Midland has an A+ rating with the BBB, and has been given 3.7 out of 5 stars for its business practices. Despite that, 67 negative reviews of Midland Credit Management reside on the BBB website alone. That’s not taking into consideration the numerous complaints about the company on other consumer advocate websites.
The number one complaint against Midland is that it breaks promises made, or acts on debt that is full of error or completely false. According to the BBB, in 2015, a court case was settled between the Consumer Financial Protection Bureau and Encore Capital Group (Midland’s parent company) over the allegations that “the business bought debts that were inaccurate, lacked documentation,and unenforceable and collected payments from consumers using false statements and false court documents. Under terms of the Assurance, the business agreed to refund consumers $42 million, pay a $10 million penalty,and stop collecting over $125 million worth of debts.”[1]
Although settlement of the dispute does not admit guilt, this case — combined with the wealth of consumer complaints made in the last decade provides a clear indication that Midland may be engaging in practices that violate consumer rights under the FDCPA (Fair Debt Collection Practices Act).
The FDCPA is a federal law passed in September 1977 to help protect consumers from a high prevalence of predatory debt collection practices that were often abusive in nature. The Act set out specific requirements that clearly defines the types of practices lenders and debt collectors can and cannot employ in attempts to collect a debt. Violation of any of these requirements is prosecutable under the law.
Know Your Rights
According to the Fair Trade Commission (FTC), the FDCPA restricts lenders and debt collectors from engaging in the following practices:
Harassment
“Debt collectors may not harass, oppress, or abuse you or any third parties they contact.”
- Threaten violence or harm
- Make public names of those consumers who refuse to pay (exception: giving the information to the credit reporting companies)
- Use inappropriate/obscene language
- Repeatedly use the phone to annoy or harass
False Statements
“Debt collectors may not lie when they are trying to collect a debt.”
- Say they are attorneys or government representatives when they are not
- Tell the consumer he/she has committed a crime
- Lie by saying they operate or work for a credit reporting company
- Misrepresent the amount of debt owed
- Say letters or paperwork they have sent are legal papers
- Say papers they’ve sent aren’t legal forms when they are.
- Tell a consumer they will be arrested if they don’t pay
- Say they will seize, garnish, attach, or sell a consumer’s property or wages unless they are permitted by law to take the action and intend to do so
- Say they will take legal action against a consumer, if doing so would be illegal or if they don’t intend to take the action.
Misrepresentation
“Debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
- Give false credit information about a consumer to anyone, including a credit reporting company;
- Send a consumer anything that looks like an official document from a court or government agency if it isn’t
- Use a false company name.
Unfair Practices
“Debt collectors may not engage in unfair practices when they try to collect a debt.”
- Try to collect any interest, fee, or other charge over the amount owed unless the contract that created the debt, or state law, allows the charge;
- Deposit a post-dated check early
- Take or threaten to take property unless it can be done legally
- Contact a consumer by postcard.
If you find yourself in the position of having to deal with Midland Funding or any other debt collector, there are specific steps you can take to protect yourself while communicating with them. First, let them know you will only be corresponding with them in writing, and that they are not allowed to call you anymore.
Lastly, if you settle for removal (paying an amount less than the total owed in exchange for your record being removed from Midland’s report to the credit bureaus), make sure it is in writing. One of the many complaints against Midland is that they promise to settle for removal, and then do not. If you don’t have it in writing, it is essentially their word against your own.
Dealing with debt collectors can add to the immense amount of stress already felt from falling behind on debt repayment. Knowing your rights and the specific measures you can take when dealing with debt collectors, will help give you some breathing room when you can start the process of recovering from bad debt.
[1] https://www.bbb.org/sdoc/business-reviews/financial-services/midland-credit-management-inc-in-san-diego-ca-101104/Alerts-and-Actions
Need Help?
If you are being contacted by Midland Funding LLC, are in debt, or need help rebuilding your credit, we can help. We’ve helped thousands of people regain financial security with our attorney-backed credit repair services.
Our Results Free Consultation
by admin | Jul 5, 2018 | Creditors and Collections
As long as there has been debt, there has been debt collectors like Ad Astra Recovery Services; the two go hand in hand. Debt is such an institutionalized part of most ancient and modern societies, that debt slavery – a practice whereby debt was passed from generation to generation – has often been an accepted component of this institution.
Debt collection has historically been an aggressive, coercive business; and before the abolition of debtors prison in the early 1800’s consequences for failing to pay a debt were often personally catastrophic.
Reasons for not paying a debt don’t solely fall on negligence. Other circumstances include financial hardship, disputes with the debt, unreasonable expectations in interest and penalties, and failing health.
Considering the circumstances by which debt has accrued has contributed in a relaxation of laws against debtors over the past century, and affords them protection against negative and aggressive debt collection practices by creditors and third party debt collection agencies.
In September of 1977, Congress passed the Fair Debt Collection Practices Act (FDCPA), which protects consumers from abusive debt collection practices. This law was passed in order to give the consumer protection from what was up to this point, aggressive practices by debt collectors.
Since that law was passed, the nature by which debt collection has changed for the benefit of the consumer. However, from time to time, agencies violate the law, forcing consumers to seek litigation against these agencies to protect their rights and fix their credit.
Who is Ad Astra?
Ad Astra Recovery Services (AARS) may be one of these third-party collection agencies. Ad Astra was founded in 2007 in Kansas, and is a collection agency, check recovery service, debt repayment planner, and payday loan service provider according to the Better Business Bureau (BBB). It is located at 7330 W 33rd St N #118, Wichita, KS 67205-9370. Their phone number is 316-941-5488.
In the past three years, both the BBB and the Consumer Financial Protection Bureau (CFPB) have received over 420 and 380 complaints respectively, about suspected below board practices initiated by Ad Astra (AARS). At least 13 cases of federal civil litigation have been recorded against Ad Astra Recovery Services for violations of the Fair Debt Collection Practices Act.
An example of an alleged violation against Ad Astra can be seen in a 2013 case against them brought by a consumer in Illinois. According to the consumer, Ad Astra verbally abused and practiced intimidation in order to get the consumer to pay an outstanding payday loan that he insisted he never took in the first place. The case was later settled between the consumer and Ad Astra.
Many of those who have complained about Ad Astra, and probably even more who haven’t lodged formal complaints may have qualified to bring litigation against AARS for violation of the Fair Debt Collection Practices Act.
Ad Astra collections and the FDCPA
The Fair Debt Collection Practices Act prohibits debt collectors to engage in the following practices:
- Contacting consumers outside of the hours 8:00 am to 9:00 over the phone, and any time inconvenient to consumers due to work schedules, family schedules, etc.
- Failure to cease communication after the consumer has requested in writing that the collector engage in no further communication or has refused to pay the debts (with exception for notification of termination of collection efforts, or intention to file a lawsuit against the debtor)
- Calling the consumer repeatedly or engaging a consumer in a phone conversation repeatedly or continuously with the intention of annoying the consumer, abusing, or harassing him/her
- Talking to consumers at their place of employment, including telephone conversations after the employer has requested it to be stopped
- Contacting a consumer who is knowingly being represented by a lawyer
- Communicating with a consumer after he/she request validation and before the validation has been sent
- Misrepresenting the debt or practicing deception against the consumer
- Publishing name and address of the consumer
- Pursuing collection amounts that are unjustified
- Threatening the consumer with legal action or arrest
- Using abusive or profane language
- Sharing consumer debt information with third parties
- Using methods to communicate with the consumer that would personally embarrass him/her such as displaying embarrassing language on the outside of a mailed envelope
- Sending incorrect, intentionally false information to a credit bureau for the purposes of misrepresentation on the credit report
The FDCPA also requires creditors and debt collectors to adhere to the following requirements:
- Debt collectors must identify themselves as such and notify the consumer that they are attempting to collect a debt in every instance of communication
- The debt collector must provide the name and address of the creditor of origin
- The debt collector must inform the customer that they have the right to dispute the debt
- If the consumer sends in a request for verification or they dispute the debt, the collector must send the consumer the requested information
- If the collector files a lawsuit, it must be done in a proper venue such as the consumer’s residence or place in which the debt was initiated
The above requirements are just that — requirements. Violations of one or more of these requirements can be prosecuted under the law. Debt collectors like Ad Astra may also violate another law, the Telephone Consumer Protection Act of 1991 as well, if the collector sends robocalls to a consumer’s cell phone without prior consent by that individual.
Suspected violations of either or both the Fair Debt Collection Practices Act (FDCPA) or the Telephone Consumer Protection Act (TCPA) is prosecutable. Consumers do have the right to pursue litigation against debt collectors who have engaged in unfair and unlawful practices in order to collect a debt.
If you receive communication from Ad Astra or other debt collection agencies, know your rights well. If you feel they may be engaging in measures that violate your rights, let them know that. If they continue, you have the right to lodge your complaint with the Better Business Bureau, and even pursue litigation. The Better Business Bureau has a publicly viewable website that shares all complaints against a business with the rest of the world.
Complaints on the Better Business Bureau’s website against Ad Astra include not honoring an agreed upon settlement, not honoring a Pay For Delete agreement, inputting incorrect information on a credit report, failure to provide proper debt validation, lying about debt payoff conditions, submitting a false collection claim, and many others.
Need Help?
If you are being contacted by Ad Astra, are in debt, or need help rebuilding your credit, we can help. We’ve helped thousands of people regain financial security with our attorney-backed credit repair services.
Our Results Free Consultation
by admin | Jun 20, 2018 | Creditors and Collections
Living in a world full of easy money means a constant juggle of offers, some great – some not so good, to take on debt. Racking up debt is incredibly easy to do, and before you know it, the amount of debt you have a responsibility to pay off can become overwhelming.
The idea of erasing that outstanding debt you’ve had lingering on your credit report for years can seem like too good of an opportunity to pass up. If you’ve heard of Pay For Delete options, you may feel quite tempted. But before you pick up the phone to strike a deal with that debt collector, it’s important to understand the realities of this gray area practice.
While in the past, collectors who actually have been able to delete derogatory debt records in exchange for payment may have come knocking at your door, most debt collectors neither have the interest or the ability to completely delete your bad credit.
To fully understand all that is great and not so great about Pay For Delete, it’s important to know exactly what Pay For Delete entails. If you have outstanding debt with a creditor, you can contact them to negotiate a deal. The deal entails you paying either all or part of the total outstanding balance in exchange for the creditor removing the record of outstanding debt from your credit report.
Since most debt collectors buy consumer accounts for small amounts or for a percentage of the recovery amount, negotiating a settlement amount less than the total is no problem. Getting a creditor to agree to a Pay For Delete option may be possible, but you’ll need to make sure to get the deal in writing, just in case you see the derogatory account entry pop back up on your credit record.
Most large lenders won’t even entertain a Pay For Delete option with you. So if you give them a call expecting some wiggle room, don’t expect much, especially in a Pay For Delete scenario. What you may not know about Pay For Delete is that it is often not possible for creditors or debt collection agencies to wipe that record of that debt entirely off your credit report.
This is because there may be multiple entries of the debt over the course of that debt’s lifetime. Entries are made on your credit report when your original creditor reported your account past due. Entries are made again when that account is sold to collections. Once you’ve settled your account, another entry is made. So, even if a creditor wipes out one entry, previous evidence of your delinquent account may be lingering on your report.
Also, the practice in general floats around in the gray area of legality. Creditors are obligated to report the most accurate and up-to-date information to credit reporting agencies. Creditors send information on a regular basis to credit bureaus about any or all of the accounts you hold with them, including outstanding debt.
If creditors are agreeing to wipe out your record, then that doesn’t fall in line with policies regarding accurate reporting to the credit bureaus. You may have a difficult time finding lenders who will agree to Pay For Delete, though smaller debt collection agencies, medical debt collection, or creditors that agree to circumstances beyond your control, may be more inclined to do so. All in all, only about 10% of creditors actually agree to Pay For Delete deals.
The other downside to attempting a Pay For Delete deal is refreshing the statute of limitations on the account. All possibilities for litigation in an effort to collect bad debt lives only for a certain amount of time, usually anywhere in between three and fifteen years.
Once you’ve made it to the end of the statute, debt collectors can no longer pursue you to collect the debt through legal means. The statute starts from the date of last activity on your account. So, if the last activity was the transfer of the account to collections, your account may be progressing toward the end of the statute. Once you make that call to the debt collection agency to arrange Pay For Delete, the statute of limitation restarts from the beginning.
The conversation about Pay For Delete is becoming increasingly obsolete, as more financial institutions start to adopt newer credit analyzing algorithms. FICO 8 and VantageScore 3 both no longer hold outstanding debt against your credit rating if you have paid the balance off.
Yes, the record is still listed in your credit report, but these new methodologies don’t pay it any mind. So, if your bank or credit card company hasn’t switched over to FICO 8 or VantageScore 3, they will in the future, and the Pay For Delete conversation will be irrelevant.
FICO 8 already ignores debt less than $100 when calculating it’s scoring, so you may want to consider paying off large debt first, since those bigger numbers have more of an impact on your credit rating.
VantageScore gives less priority to medical debt compared to credit card debt or outstanding mortgage payments when calculating its score. So while it’s important to settle all debt reflected on your credit report, it may be worth your while to start with the more heavily weighted debt first.
In the meantime, even if you choose not to pursue a Pay For Delete option, you should be working to chisel away at outstanding debt, whether the account is held by a creditor, or it’s been sold off to a debt collection. The debt you will have repaid will help raise your credit score. And as more creditors move to the new system, your chances of being approved for a better loan will increase thanks to a combination of the new system and your paid off debt.
