Pay off Old Collection? or Not??

iVillage Member
Registered: 10-10-2003
Pay off Old Collection? or Not??
5
Tue, 06-20-2006 - 4:51pm

I have a dilemma..maybe some of you guys can give me some advice...

I have a collection on my credit. It's for $1550. (It was an old private student loan originally for $2500) For one reason or another.. I haven't made a payment on it since 1/04. Equifax is the only report it's on. The Original creditor has it on my report that it's in collections. The last "activity date" is showing to be on 10/02.

I have gotten letters from collection agencies trying to collect, and then I wouldn't hear from them for a while. A new collection agency has contacted me regarding this debt in May. (although I haven't seen if they have reported to the credit agencies yet...)

My questions are these:

1. Does the 7 years start from date of last activity? or date of last payment, because they both are different dates.. (see above)

2. I just got a $800 bonus from work,and I want to try to settle with them.. but the more I am reading, the more I am thinking I might not want to... or at least try to get them to put on the account settled in full

3. IF the collection agency agrees to put "settled in full" that doesn't mean the original creditor will do that , right??

4. What to ya'll think I should do about this debt. My main goal is to IMPROVE my credit score. I am going to need to buy a new car within the next year or so, and want to make sure my credit is up to par... It was 630, the last time I checked.. (yeah.. not great.. but definatley improving since I paid off all my credit cards since then..)

I want to make good on my debts.. but I also don't want it to kill my score.. or restart a clock, or something....

ANY advice , suggestions would be GREATLY Appreciated!! Great Board!!!

iVillage Member
Registered: 05-10-2006
Tue, 06-20-2006 - 6:33pm
The clock resets as of date of last activity but collection agency's purchasing the debt don't count. How much of the 1550 is interest?
iVillage Member
Registered: 10-10-2003
Tue, 06-20-2006 - 8:00pm

hmmm. the debt was about 1100.So I guess $450 is interest. (I know SO stupid. It's really not a lot of money. But I am trying to save for baby #2, so everything is a lot of $$ right now!)

iVillage Member
Registered: 05-10-2006
Tue, 06-20-2006 - 11:58pm
Okay, It will not be off your credit report until 2011. It could drop off in 2009 but if they look at their records and see the last payment was in 2004 then they will update that so it stays on your report. If you just make a payment now, it will restart the clock. If you want to clear it up, save up all of it and pay it all at once or a hunk of it and call the collections company to see if they will accept x as payment in full for the account. If they accept, then send them a letter (or fax since it is faster) stating the terms and have them sign it BEFORE you send the payment. Hope this helps.
iVillage Member
Registered: 03-17-2003
Wed, 06-21-2006 - 12:52am

I believe she should validate the debt with the Collection Agency. There are already 2 CAs who have bought the original debt from the OC (original creditor -- school loan) and until proven otherwise she does not owe any Collection Agency a penny.

The collection account has been sold by her original creditor to a collection agency(CA). This is a common practice. She may not owe the CA anything. They must prove to her that she owes them money. Just because they bought a debt from your original creditor does not mean you legally owe the CA. Uninformed debtors (those who owe money) simply make the leap that because they never paid off the debt they somehow owe a CA money. NOT TRUE! Do you have a copy of a contract with a CA proving you owe a CA money? Didn't think so. Her original creditor (private student loan) gave up collecting her debt and sold the account off to a CA for pennies, sometmes less than one cent on the dollar. For example the last balance was $1,550 so the CA conceivably paid 1% or $1.55 for her account, they report her to the credit bureau, send letters and start calling. The hope is you are feeling awful about a negative on your credit report and guilty about the original debt not being unpaid that you will give them $1,550. Sweet deal for the CA. They make an enormous, a HUGE profit off her and she paid a substantial amount of money to them without checking to find out if she even owed them!

So what do you do to prevent getting taken advantage of by a CA? You write a debt validation letter. Any of the credit sites on the internet can google a sample letter. You want to find out if the CA was assigned the debt or purchased the debt. In other words do you know for a fact you legally owe the CA? It makes all the difference in the world! In an assignment, the collection agency does not own the debt, and therefore you do not technically owe them any money. There is no way for a collection agency to prove that you owe them money because there is only an assignment of the debt and not a contract between you and the creditor.

Now if the CA did purchase the debt, this does not make them the original creditor. They are still a debt collector and covered by the FDCPA. Continue to treat any CA, zombie debt buyer (organizations that buy old, uncollectable debts that have expired), a run of the mill junk debt buyer or law firm who says they own the debt as a collection agency subject to the FDCPA. This is your right by law. You can still request validation and proof of the purchase, because if they can't validate it, the collection agency can't prove you owe the debt.

Remember, it's your money and just because someone tells you that you owe them money does not mean you really do owe them anything. The law protects you from these tactics. Your protection is a debt validation letter that requires any CA to prove you owe THEM money.

And usually after a CA receives a letter requesting validation of debt, they sell you off to another CA and the process continues.

So my advice is to never immediately pay any collection agency.

And the statute of limitations, which is the deadline for a creditor to file suit to collect, is probably running out. Most SOL seem to average 3 years -- depends on which state you live.

Believe me, no CA is going to farm off a $1500 debt to a $300/hour lawyer to sue her. The lawyer's billable time would quickly cost more than the cost to sue in order to get a judgement on which to collect. Would you hire a lawyer and pay $3,500 to collect a $1550 debt? Neither would I.

I think she should sit tight and save her money. Let the old history fade away while she continues building good credit history. If she squirreled away the extra money in a simple savings account and added to it over the next year, by the time she applies for an auto loan her negative would be "old" (and my credit friends all agree nearly everyone with a pulse has some negative blip on their credit reports), she would have clean current credit history showing she has managed her debt, plus a savings account to show she can manage money AND debt.

Just my opinion.

Carolyn

iVillage Member
Registered: 10-10-2003
Wed, 06-21-2006 - 9:13am

Thank you so much for you advice. I will DEFINITELY put your words of wisdom to good use. I am going to put my money away for now before I decide to pay anyone anything.

Thank you so much! Very Informative!