Saturday, May 31, 2014

How Much Money Do Debt Collectors Make?

How much money do debt collectors really make?
If you're here then the odds are you've had issues with a collection agency at some time or another. And, like most of us, you've probably wondered how much money debt collectors make. After all, a person would have to be willing to berate and humiliate others for a living--surely the collection agency would have to offer an attractive salary to compensate, right? Not necessarily.

How Much Do Debt Collectors' Make Hourly?

All collection agencies have their own distinct compensation packages, but if you're a debt collector, you're a lot more likely to be paid by the hour than earn a predetermined salary--and the amount you earn will vary by a wide margin. Some debt collectors, for example, earn less than $10 an hour. That's little above minimum wage. You have to admire the irony of someone who knows exactly what its like to hardly make ends meet yet calls your inability to cough up hundreds (or thousands) of dollars nothing but "excuses."

Most debt collectors, however, earn somewhere in the neighborhood of $12-$15 dollars an hour. The job's low pay rate is partially due to the fact that, although the work is soul-crushing for most individuals, you don't need experience or a college degree to do it. You don't even really need much training which is a plus for the agencies because the collection industry has a very high turnover rate.

How Much Commission Do Debt Collectors Make?

Collection agents have the opportunity to advance their pay beyond their hourly wage by earning commissions on the debts they successfully collect. Surprisingly, the commission rate for most debt collectors is abysmal--often less than half a percent. Keep in mind that the collection agency itself is often working on a commission and the lion's share of the collected debt goes to the original creditor.

Let's be generous and say you're a debt collector whose commission rate is half a percent. Your
Debt collectors must often meet strict quotas.
quota for the month is $150,000. If you meet your quota, that leaves you with a take-home commission of $750. For some people, that's an entire month's rent or mortgage payment. It's certainly a healthy incentive for a debt collector to meet or exceed his/her monthly quota. The sad irony here is that, in many cases, debt collectors are clearly underpaid and then offered "incentives" like commission to make up for money they should be receiving anyway just to do their jobs.

The exception to the low-commission rule is the student loan collection industry. Student loan collectors who convince a debtor to make monthly payments over a certain percentage of the loan balance (and this number varies) will often receive either a hefty commission (15% or more) or a cash bonus for each successful deal.

How Much Do Debt Collectors Earn in Bonuses?

Although all collection agencies' policies differ, bonuses are a near universal component of the industry. The top collector for the month/quarter/year will be awarded a substantial bonus. Bonus amounts vary widely, but if a low hourly wage and pitiful commission rate doesn't motivate a debt collector enough, an extra $5-$10k almost certainly will.

I welcome any contributions from actual debt collectors who'd like to discuss their salary and job perks. I am willing to change your name to protect your privacy.

Friday, May 30, 2014

Q&A: Has My Credit Card Debt Been Re-aged?

Hi Lee, 

I've been reading your Collection Agency blog. Thank you so much for doing this- it's been very helpful. 

Seven years ago, I defaulted on my credit cards due to a long period of unemployment.

Much of this debt should have fallen off my credit report in April and the SOL expired in my state in 2011 for some of the debt and 2012 for the rest of it. I stopped making most of my payments in March 2007. The Credit Bureau told me that it depends on when the creditor reports me as delinquent. 

In 2012, I disputed a few instances of re-aged debts with the Credit Bureau, but they told me at the time not to worry about the collection account's difference in reporting dates-- that they knew the original creditor's date of first delinquency, and that the collection agency's date of reporting didn't matter. When I contacted them again this April to ask why the debt hadn't fallen off my report, they claim to need information to make a change to the report. Should I send them the copy of that dispute I made in 2012? I am not sure what to do. I assumed the debt would fall off automatically. In one case, the date of first delinquency is reported as 2009, but that's well over 2 years after I stopped paying.

Equifax said the debt remains for 7 years, but I've read some blogs that say 7.5 years, so I'm confused on this. What is considered the first 'delinquent' date? In California for purposes of the SOL, it is considered the last time you made a payment. Would this be considered the Date of First Delinquency to the Credit Bureau? Or would it have been when the cards were 180 days past due? I know I was reported with a 30 day late in April 2007.

Thanks so much for your advice. 



The credit reporting period works like this: Federal law requires the credit bureaus to remove your delinquent debts after seven years, but the seven-year clock doesn't even start ticking until your debt is 180 days old. The clock for the 180-day period begins ticking on the date of your last payment. The reason it takes 180 days to start the 7-year reporting period is that the 180-day mark is the point where most credit card companies "charge-off" the debt. That doesn't mean the debt is gone, of course, its simply to get the bad debt off that year's books for accounting and tax purposes. 

Of course, during this 180-day period, the debt is probably going to show up as delinquent on your credit report. That means that, although the credit reporting period is technically only seven years, its normal for a debt to hang around on your credit history for 7.5 years before being removed. 

If your debt was 30-days delinquent in April of 2007, that means that the credit reporting countdown didn't begin on the debt until September of 2007. Thus, don't expect the credit bureaus to remove it until September 2014. And they were right to tell you that they know the original delinquency dates--they do. The original creditor's automatic reports to the credit bureaus always contain dates. These dates don't always show up on your credit report, but they're there. The dates you see on your credit report for collection accounts generally reflect the date the collector first received or first reported the debt--not the original date of first delinquency from the original creditor. 

The statute of limitations for lawsuits is a totally different beast from the credit reporting period. The statute of limitations refers to the period of time in which a creditor can sue you for the debt. The statute of limitations for debt is calculated from the date of your last payment, and it doesn't carry the same 180-day "waiting period." The bad news, of course, is that if you make a payment you restart the clock on the statute of limitations and the collector regains the right to sue you. Making a payment does not, however, have any effect on the 7.5 years that a negative item will remain on your credit report. 

Long story short, you don't need to send the credit bureaus anything. Their computer system has the original dates on record and should automatically remove the original creditor's tradeline and the collection account attached to the debt in September. Just to be safe, consider pulling your free credit reports this October to ensure that both negative accounts are gone. 

Best of Luck,

Related Posts:

Q&A: Will Private Student Loan Lenders Do a Pay-for-Delete?

Hi Lee,
Someone on one of the forums I read suggested you might have some insight on this.
I have a large package of student loans from grad school (around 80k). Interest rates on the different packages are in the 6-8% range. The loans are held by a private servicing agency that bought them up from the original lender. I am current on all loans at present but there is significant negative payment history in the past 3-4 years.
Due to some fortunate circumstances I am now in a position to pay the loan off in full. However, I am wondering if I should be trying to extract any perks or considerations from the loan servicing agency as a condition of paying in full, e.g. having negative history removed from my credit report. I don't know whether they would be at all motivated to do something like this. 

As an aside, I also noticed that the "full payoff amount" listed on my loan statement is slightly higher (by about 1200, or the equivalent of one monthly payment) than the amount owed. Is that normal? Like a small early payment penalty or something? 
Can send more details if you need them, but would prefer my name / name of the agency not appear on the web. 




I agree that you're in a power position here and definitely think you should milk that for all its worth. As far as your negotiation options are concerned, here are three:

1. Request a Pay-for-Delete 

For those just stepping into the classroom, a pay-for-delete is just what it sounds like: you pay the debt, the lender removes the late payment notations or, in some cases, entire tradeline, from your credit report. Lenders and collectors are a lot less likely to accept pay-for-delete agreements than they were 10 years ago because it violates the contract they have with the credit bureaus. But with an amount this high and you willing to pay in one lump sum, its possible they may just bend the rules for you. And those negative payments may work in your favor toward this goal. 

Ideally, the student loan lender wants you to pay off your loan over the span of the original agreement. Paying it off early infuses the lender with extra cash, but the lender loses out on all the interest that would have accrued if you had continued making your scheduled payment every month until the loan was paid in full. But you have a spotty record of paying this loan, and any collector who can do simple addition knows that makes you a much higher default risk than someone who has never skipped a payment. Financially, its a smarter move for them to accept your offer and remove the lates from your credit report. 

Of course, there is no guarantee this is going to work. If the rep you speak with refuses your pay-for-delete proposition, call back and ask another rep. You can also ask to speak to the supervisor and make him aware of what you want to do, since call center reps often have neither the ability nor the authority to alter consumers' credit records. 

2. The Goodwill Letter

I don't know how many late payments you have Anonymous, but you may be able to have a few removed using the age-old "goodwill letter." A goodwill letter gives you the chance to explain the circumstances around  your late payments and point out that, due to circumstance, those lates aren't truly indicative of your financial risk level. Ask that the lender remove the late payment notations as a gesture of good will and, if it does so, you will follow with your own gesture of goodwill by paying off the loan in one lump sum. Because this isn't a direct pay-for-delete, and because goodwill letters are still fairly effective, option 2 is more likely to work than option 1.

Make sure you send your letter to a CEO, a President or Vice President or head of the credit reporting division. The important thing is that you reach a person who has the power to fix things for you. That's a lot less likely to happen if you send your letter off to the company and it gets opened and read by a peon who doesn't really care one way or the other. Don't trust someone else to send your letter to the top, you need to make sure it gets there. 

I doubt significantly that a lender would be willing to remove more than two or three late payments from your credit report due to a goodwill letter--even though you're paying in full. If you choose this route, take what they offer you. Having a few lates removed is better than none. Just make sure that the lates they choose to delete are the most recent ones, since recent information has a larger impact on your credit scores than older information. 

3. Debt Settlement

Now, I don't even like talking about debt settlement, but it wouldn't be fair of me to not bring it up at this point. You've got a lump of cash and you want to get rid of that student loan. If the company refuses to modify its tradelines in exchange for payment, it may still settle the debt for less than you owe provided you pay the new debt in one lump sum which, clearly, you can do. While this doesn't directly benefit your credit, it leaves you with additional cash with which to pay down other debts. 

A few words of warning: If the lender agrees to settle the student loan, make sure that you request in writing an agreement that the debt will be reported to the credit bureaus as "paid in full," and that the remaining unpaid balance will not be sold to a collection agency. If they report it as a "settled" debt, its just going to make things worse, credit-wise. Plus, you don't want to believe you've put all this behind you only to wake up one morning from a slew of collection calls all demanding that you pay the remaining balance on a student loan you already settled. Tread with caution with this one. 

I'm sorry I couldn't be of more help than this. Also, your payoff amount is higher because you aren't just responsible for the loan's current balance but also any interest that would have accrued if you'd adhered to the original payoff schedule. 

Best of Luck,

Related Posts:

Death of the Pay-for-Delete Agreement

Student Loan Collection

Can You Settle With a Federal Student Loan Collection Agency?

Thursday, May 29, 2014

Q&A: Federal Student Loan Collection Scam?

I have a very old federal student loan (Over 15-20 years). They suddenly are calling begging me to pay "Anything" on it. They are down to $100 a month. This debt should be about $86K but they are saying it is almost $200,.000. 
I have been sick for the past few years, my credit is already shot for the rest of my life, I owe more than I can ever pay back in a life time now. Literally my health is so bad I don't expect to be around in 5 years or so.  So I don't care about my credit at all, but I am suspicious.
If I send them money, Anything, does that validate the debt and reset the clock to sue me and allow them to start suing and me for the money?
I am afraid to send them even a dollar at this point.

They won't give me any information on it and demand that I pay them over the phone. It is a company called Revcrest. If one of my clients came in and told me this story I would recommend that they not pay them until they send some kind of information. I told the guy on the phone once, Why am I going to give a credit card number or run and get a pay card and give it to someone that calls me out of the blue and demands it with nothing else? Interestingly they do know that I tried to make a payment deal years ago for $750 a month, but I got sick (Heart trouble, brain tumor, it has been a bad decade) and couldn't pay anything to them. So they have some information that a scammer wouldn't know. That was with AEA I think though. This is the first that I have heard from these guys.
The amount is so much unless I hit the lotto I will never be  able to pay even the interest on it now. I was going to file for BK when I got out of the hospital last time and try to negotiate cause I was 100% disabled and not expected to go back to work ever, but silly me, I got better. I am at about 40% on a good day and can work "Really" about three days a week. They finally removed the tumor, gave me tons of medicine for my heart - silly me, I started to recover. Five years sick, now I have tax issues that would scare anyone and owe everyone money. 
But I am glad to just be alive - seriously, it was bad last year. No one can believe that I am up and walking around let alone working again.
Yes, I really need some good advice.



I have some good news and some bad news. The bad news is that there is no statute of limitations on federal student loans. There used to be but when the lender (our government) is the one making the rules, you have to expect the deck to be stacked in its favor. The good news is that if they thought you were worth suing or thought they could get anything out of you at all, they probably would have already sued. Lawsuits for collection agencies are a last resort. Lawsuits for the government...well...that's just an everyday matter of course.

Under normal circumstances, having exempt income, such as Social Security, and not owning any property would protect you from the financial consequences of losing a debt collection lawsuit. Unfortunately, the rules governing federal student loans don't provide debtors with the same protection they'd receive if they were fighting a defaulted credit card or regular loan. The government can and will garnish exempt income to satisfy a government debt. There are limits to how much they can take, but anyone who has ever had to eek out a living on Social Security or government assistance will tell you--they need that extra 15% just to survive.

I have to admit, its very odd that this company is so adamant about you paying something--anything. That really does sound like a commercial collection agency trying to trick you into making a payment and resetting the statute of limitations so they can sue you. If you're 100% positive this loan is federal, they don't have to wheedle and whine and threaten and beg--they can just take. They could sue you, but technically they don't have to. They can garnish, levy and lien as much as they like without even bothering to take you to court.

At first I had an "A-ha" moment when I realized that the SOL on your student loan must have expired before the federal government eliminated the statute of limitations. Thus, you'd have to restart the SOL yourself before they could touch you. But that cannot be the case because the existing statute of limitations was eliminated in 1993 and you claim this debt is no more than 20 years old. Plus, that nasty bit of smacking-the-American-taxpayer was retroactive--allowing the government to chase down and collect billions in student loan debt from people whose statutes of limitations had already expired.

That makes me feel physically ill.

So John, that brings us to an impasse. Why are they calling you if they clearly have no intention to force you to pay up? You have an income and they have the legal right to take it. Why don't they? Unless, of course, they're scam artists, like you suggested. Scam artists can get a wealth of information about you and, unlike the government, they only get their money if you offer it up voluntarily. There is a real Revcrest and they do collect defaulted federal student loans, but that doesn't mean that the people who are calling you are actually working for Revcrest. It's also highly suspicious that they want you to send them a prepaid card or give out your credit card number over the phone. Most collection agencies demand a direct bank draft, so this prepaid card nonsense is a huge red flag. Bank drafts leave paper trails. Prepaid cards do not. And yes, a scammer can get information about your previous payment attempt with your lender. If the records exist, they can be found, read and exploited.

Collectors are about as predictable as a rabid housecat, but still....from what you've told me so far I can't help but think someone's trying to scam you, and there's a surefire way to find out. Go pull your free credit report (you can get it from without having to put in any credit card information). Your credit report will list your current creditors. If Revcrest is on there, this could be legit. The next time they call, try asking them for their mailing address. A real collector will give out this information, but a scam artist may balk. You can always use Google to double check any information they give you.

If the worst case scenario is true and you do owe Revcrest $200,000, there may still be a way out. Federal student loans generally cannot be included in a bankruptcy unless the debtor's situation meets very strict guidelines. You're no longer technically disabled, but you may qualify for an undue hardship discharge. Basically, if you can prove to the court that paying this $200,000 would place an undue hardship on you and those you support (if anyone), you can have the loan discharged. It's not easy to get an undue hardship discharge, but given your health and your work capacity, I'd say its worth a shot. What's the worst that can happen at this point? Heck, if you meet the guidelines, you  may be able to take care of that tax debt along with it. At the least its worth a free consult with a few bankruptcy attorneys to see what they make of the situation.

I don't generally do this but, on a personal level, grab happiness wherever you can. Your situation is frighteningly similar to what happened to my father. I was too young back then to know how to help him and ultimately, it was the stress and threats from the collectors that killed him, not his illness. So now I spend my life trying to help others not fall into the same pattern of emotional destruction and stress that killed my father. Remember, they can take away everything, but they can't take YOU.

And if you have the resources to make the move, consider moving to Canada. Not joking here. It's a total fresh start, the ground is clean, the water is clean, the people are nice, your credit history can't follow you and the healthcare is amazing. Even without a Canadian heath card, you pay less out-of-pocket than American insurers charge for co-pays and co-insurance. Hang in there. It can only get better.

Best of Luck,

Wednesday, May 28, 2014

Q&A: Will Collection Agency Lien a Mobile Home?

Mr. Edwards,
I have a rather complicated situation, but your blog postings have provided me with a wealth of information, and I value your judgment.  I hope you can answer a couple questions for me.

The scenario in brief:  My sister and husband had unsecured debts originating in 2011 or prior.  Their only income is minimal Social Security and a paid-for 2006 mobile home in a park (no land) in Pennsylvania.  My 84-year old brother-in-law became incapacited with dementia and a permanent resident of a nursing home in December 2012.  Unable to continue paying the 3 debts, my sister originally contracted with a ‘debt relief’ firm and tried to pay them for about 8 months, before becoming unable to pay due to my brother-in-law’s medical and nursing home costs.  Late last year my sister put the mobile home up for sale (value about $39,000) and I moved them to be near me in Colorado.  She is in a low-income apartment and he is in a nursing facility here, and I am handling their business and finances. The mobile home is in joint ownership.  The collection letters are addressed only to my brother-in-law, but I don’t know if they jointly signed for the original debt or not. 

The question: The debt relief contract staved off the debt collectors for that time but my brother-in-law has received 2 notices from Viking Client Services (Minnesota) collection agency  for one of the uppaid debts in the amount of $16,000.  I am uncertain if I should inform the collection agency of their situation because I fear it will push them to file for a judgment and lien against the mobile home, making it even more difficult to sell; or just let them continue to make collection attempts and see if they go as far as trying to lien the property.  What would you suggest?

I would greatly appreciate any advice you can provide that might assist me in handling this and not making it worse. 

Thank you,



From my standpoint, your relatives seem to be in pretty good shape as far as collections are concerned. Yes, I'm sure you're sitting there aghast that I just said that, but hear me out. Their only income is Social Security. When traditional collection methods fail, collectors sue. Once they have their judgments in hand, they immediately begin garnishing the debtor's pay and bank accounts. Unless, of course, the only funds the debtor has are exempt. So the debt collectors can whine and cry and wheel and deal and threaten all they like. As my grandmother used to say, "Can't get blood outta no turnip, boy." Personally, I'm surprised they kept paying as long as they did. 

Now, if they own that mobile home a debt collector could conceivably place a lien on it--but that's highly unlikely. Highly. I worked in real estate for a few years (still do occasionally, if the contract's good enough) and I can tell you: there is nothing on this earth harder to sell than a mobile home. What would happen is that the collection agency would spend all this money on legal fees to take your family to court and for what? Non-garnishable income and a mobile home that would sit there and accrue property taxes because the collection agency couldn't sell it? Sure they could, but it takes more time and money and patience to seize and sell a mobile home than a traditional home or car. Collectors are all about the bottom line. Patience just isn't that industry's strong suit. 

And to add fuel to this fire of madness, the mobile home is jointly owned. Since its located in Pennsylvania and Pennsylvania isn't a community property state, the collection agency would only be entitled to half of the proceeds from the home sale--making seizing this property a lot less appealing than it was originally.

So, here is my opinion and just my opinion: If it were me, I would waste no time in letting the collectors know that my family members were both on Social Security and that it is their sole income. I would also inform the collectors that one is in a nursing facility and the other is living with a friend. This tells the debt collectors three things right off the bat: 

1. They have no paychecks to garnish.

2. It's illegal to hit them with a bank levy. 

3. They have no property to seize. 

I wouldn't lie. I would just omit the fact that they owned property in another state. You are under NO obligation to give a collection agency information that it needs in order to pursue your elderly family members. Your family members aren't completely judgment-proof, but they are enough so that letting a collector know these three things should get their debt written off the books. If they sue and take the mobile home, they sue and take the mobile home. At this point we have to just count on the smart business sense of the agency and your ability to make it clear that your family members are on Social Security and both are currently living in rental situations. 

I genuinely don't feel these debts are a threat. I don't. The debt collectors will keep calling (because that's what they do) and you keep telling them the same thing (or stop answering the phone) and as soon as the statute of limitations for lawsuits expires, hit them with a cease and desist order. Boom. Problem Solved. 

Best of luck,

Related Posts:

Does Requesting Debt Validation Restart the Statute of Limitations?

I've been getting a lot of comments on another post from people who all seem to want to know whether or not requesting a debt validation will restart the statute of limitations on their debts. Everybody knows the rule is to lay low--especially if the original statute of limitations has yet to expire. Nobody wants to put a target on their head. But if you're trying to clean up your credit, a debt validation request is often a vital step in that process.

The simple answer to this questions is a resounding NO. Asking for validation doesn't restart the clock on
Debt validation doesn't reset the SOL clock.
your debt's SOL or renew the credit reporting period. Nor does it give the collection agency any additional cards to play. But if the debt is old, don't get too excited when the collection agency doesn't respond. Although you are free to send a debt validation request whenever and however you please, the collection agency doesn't have to acknowledge it. I know what you're thinking, "Great! The law says no collection activity until they respond!" But, unfortunately, its not that simple.

The Fair Debt Collection Practices Act has the following to say about debt validation time limits (and if you're interested in looking for yourself, this is Section 809):

Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

So, to put this in layman's terms, the collection agency is only bound by the "no collection until validation" rule if you fired off your validation within the first 30 days after being notified of the debt. Now, its perfectly possible to not be notified of a debt until its several years old. That doesn't affect your validation rights. You have 30 days from the initial notification.

And sure, a collection agency probably can't "prove" that it has called you over 5000 times, or sent umpteen letters to your house, but they do keep records. If they've contacted you and your 30 days has run out, claiming you weren't aware of the debt is hit or miss--and its unlikely your claim will stand up in court in the face of their records, if it comes to that.

Now, while sending a debt validation letter will not restart the statute of limitations in any way, it does call attention to you. Most people who send these letters do so because its just another rung on the clean credit ladder, not because they are legitimately confused as to whether or not they owe the debt. If this debt is several years old and there has been no activity on the account, sending a debt validation letter is basically saying, "Hi Mr. Big Bad Collection Agency!! I'm here! Been here all along! I care about getting rid of this debt so please come and harass the you-know-what out of me!"

That's not to say that you shouldn't immediately request validation of any collections you don't recognize on your credit report, but if the SOL on the debt has yet to run out and you've been "laying low", calling attention to yourself probably isn't a good idea, so validate at your own risk.

Related Posts:

Debt Validation After 30 Days

Can You Reset the Statute of Limitations on a Debt?

What to Do When a Collection Agency Validates Your Debt

Collection Lawsuit Statutes of Limitations By State

Sunday, May 25, 2014

Q&A: Will Midland Credit Management Sue?

Hello Lee, 

I am unable to post to your blog for some reason, but I have been reading your blogs and you have some great information. I hope you are able to provide some insight on some of my questions regarding Midland Credit. 

My problem is that I have a super old account from Beneficial Household Finance from 2007. My DOFD was 5/2007 and at that point the debt was approximately $2800.00. In 2009, I understand that HSBC closed Beneficial Household. In May of 2010 Midland purchased the debt (or so that is the date that is stated on my credit reports that they purchased the debt). In December of 2010 they said I made a payment. And I kept racking my brain to try to figure out why I would have made any kind of payment to these scumbags. Perhaps I was just trying to do the right thing. So since I had paid off some accounts through a non-profit organization "Consumer Credit Counselors" I called and checked with them.... Sure enough they made a payment going to Midland for my Beneficial account in December of 2010. So now I have renewed the SOL and it will be on my credit report for 3 more years. Midland is now saying that I owe them $9700.00!!! How can they escalate to such an outrageous amount? And then just this year they started sending those ridiculous offer letters and calling twice a day on my phone, but I never answer them. Now it seems that they have recently stopped or slowed down. Is this a sign that they are getting ready to sue me?

This was an account that was a revolving type of account like a credit line, but it was not a credit card. I am in Nevada so does that mean that the SOL is 4 years (for an open ended account) or 6 years (because it was a contractual account).

So I will get to my questions based on the information above, and if you need more info from me in order to answer them, please let me know:

1) What do you think the likely-hood of Midland getting ready to sue me is?
2) Is it possible that they may give up and sell the debt? If so, what happens next?
3) They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?
4) Do you think the SOL for an account such as this would be 4 years or 6?
5) Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?
6) Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?
7) Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 
8) Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?
9) How can a $2800 debt turn into 3x the amount originally owed?
10) What are my options to fight them and get this off my credit report?

Thanks for your input!



For starters, thanks for letting me know which state you're in. State laws often apply and you wouldn't believe the number of people who don't include their state in their question.

I get from the tone of your letter than your credit report and scores is the most important thing to you here and on that front I have some good news and some bad news. The good news is that the date Midland first purchased and reported your debt has no effect whatsoever on the debt's reporting period. The credit reporting period for most debts, including this one, is seven years from the date of first delinquency. That means that if you made your last payment to Beneficial Household Finance in May of 2007, the credit bureaus will remove the account records--including all collections associated with that particular debt--in November 2014. That means you've got six months to wait until federal law requires the credit bureaus to remove Beneficial Household's original charge-off and the Midland collection account that resulted from the charge-off. The payment your credit counseling agency made has no effect on this. It comes off in six months, paid or unpaid.

That being said, lets get to your questions. I'm doing them out of order so that I don't have to go back and rehash anything and this can be as simple as possible.

Do you think the SOL for an account such as this would be 4 years or 6?

Credit cards are generally considered open accounts as far as the statute of limitations is concerned. Sometimes debt collectors who want to sue will try to argue that the debt is, in fact, a written account since the SOL for written accounts tends to be longer. Your state's statutes pretty clearly define credit card debt as an open account. That means your statute of limitations on this debt is four years. This gives Midland seven months to sue you or hang up their hat.

You can find Nevada's stance on this here. Read NRS 97A.060 at the very top of the page.

How can a $2800 debt turn into 3x the amount originally owed?

The fine print of your original credit card agreement contained a clause stating that, by agreeing to the card, you were also agreeing to the accrual of interest that would continue even if you defaulted on the account. So even though the account is no longer open, credit card interest has been accumulating ever since 2007. That's why your debt is now so much higher than it was when you originally defaulted.

What do you think the likely-hood of Midland getting ready to sue me is?

That depends on a wide variety of factors. If they're serious about suing you, they'll likely start to investigate you. They need to know if you are employed or receive income they can't garnish (such as Social Security) and they'll want to know if you own property they can place a lien on or if you are just a renter. Any collection agency, to increase its chances of actually getting paid, is going to go after the people who are most likely to have the funds to actually pay the debt. You can't squeeze blood from a turnip, and if you don't have assets Midland can seize, you may not be worth the time and money it takes to drag you to court.

You are, however, dancing around the danger zone. Not only do you have a debt high enough to elicit a lawsuit, you're nearing the end of the statute of limitations in your state. Most collection agencies will throw everything they've got at you and use lawsuits as a last resort, since they're left holding the bag for the legal fees if they can't collect the judgment.

Keep in mind that Midland can sue after the statute of limitations expires. The case would get dismissed on the grounds of an expired SOL, but only if you bring the expired SOL to the court's attention. I don't know Midland's policies well enough to say whether or not they habitually file out-of-statute lawsuits.

Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?

A record of the debt exists, otherwise you wouldn't have Midland on your back. But Midland will need more documentation than just its word to prove this case in a lawsuit (if you show up to defend yourself). If they sue you and you don't show up, they win by default without needing any proof. Most debt collection lawsuits end this way. If I were to guess, I'd have to say its highly unlikely that they have the kind of documentation to prove a case against you if you respond to a summons and demonstrate your intention to fight the lawsuit all the way down. Collection agencies buy debts in bulk and thus often have no records to support their claims--just a name and the amount the person supposedly owes.

They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?

The documented proof that the payment occurred is that the payment occurred. They should have no problem proving that via electronic records. As for whether or not the payment was sent from the credit counseling agency specifically for your account...that's trickier. It's an interesting claim to challenge because, if they can't prove it, that means the SOL has technically already expired. This is just my opinion, but this seems like a very weak defense because its relatively easy for them to request those records from the credit counseling agency that made the payment in the first place.

Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 

You're clearly worried about this otherwise you wouldn't have contacted me. The fact remains, however, that while you're well within your rights to consult an attorney, he/she isn't going to be able to save you from a danger that simply hasn't presented itself yet. I know its agonizing to wait and see what Midland does, but its a heck of a lot cheaper than hiring an attorney who's going to charge you a couple hundred dollars to tell you exactly what I'm telling you right now for free. Or worse--one who'll be shady enough to refer you to a bankruptcy attorney. If you opt for an attorney, be very, very careful taking that route. There's some thumping good lawyers out there who genuinely care about the little guy, but there's just as many who see you as just one more way to line their wallets. Do your homework on this one.

Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?

They haven't been unsuccessful in contacting you. By your own admission they are calling and sending letters to your home address. If it were me, I'd keep a record of this. Every call you get, write down. Every letter you get, save. This way, if they try to gutter sue you and get a default judgement using a fake or outdated address, you'll have proof to use in court to have the judgment vacated later on. So no, do not become an ostrich. Become a hawk. Watch and wait and pay attention. Because guess what? In your state, failure to properly serve a summons is grounds to vacate a judgement. That doesn't mean you shouldn't do your best to fly under the radar, if you catch my drift. Making contact with them now, right on the cusp of the expiration of the SOL, would probably be unwise...

 Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?

Not to my knowledge. The time for proactivity passed quite a while ago. At this point, even paying the original amount isn't going to clean up your credit. It won't even leave you with a "paid in full" mark on your credit report. If you paid the original amount now, the collection agency would likely just sell the remaining unpaid balance to another collection agency and this nightmare would begin anew. Your best way of being proactive is to know your rights and exercise them when and if it becomes necessary to do so.

What are my options to fight them and get this off my credit report?

Well, as we've seen, this thing should come off your credit report on its own fairly soon. If it doesn't, that means its been re-aged by Midland. That's when you can send a nice letter informing them that it is against the Fair Credit Reporting Act for them to continue reporting an account 7 years and 180 days beyond the date of your payment. Failure to adhere to those rules leaves them subject to a consumer lawsuit. Here, I'll even quote you the statute: You can find this under section 605 in the Fair Credit Reporting Act, page 22

Information excluded from consumer reports. Except as authorized under
subsection (b) of this section, no consumer reporting agency may make
any consumer report containing any of the following items of information...

Accounts placed for collection or charged to profit and loss which
antedate the report by more than seven years.

 I always recommend that people reach out to the collection agency for corrections first because, while you have every right to dispute the item as "obsolete" with the credit bureaus, you're once again in a situation where the collector has the ability to verify the lie and suddenly it becomes that much harder to dispute. Once they've "investigated" once, federal law doesn't require the credit bureaus to investigate a second time. If its any comfort, from what I know of Midland, they're pretty good about deleting their tradelines on time.

Now, this brings us back to that gargantuan debt they claim you owe. Midland, in my experience, will occasionally shelve debts rather than selling them to other debt buyers. In other words, once the SOL and reporting period have expired, the debts seem to disappear as well (that's weird for a collection agency, but I have seen Midland do this before, so you have to give them at least some credit for that)  But we have to face the facts, your debt is large and the odds are someone will have an interest in collecting it. If Midland passes the debt on to a junk debt buyer, it's very possible that this new collection agency will magically insert itself into your credit report. Be prepared for this and regularly monitor your credit from now on. You can get a free annual credit report from each credit bureau without a credit card by using the Federal Trade Commission's approved website for pulling free credit Since you can get a report from each agency, I have always found it most prudent to pull one report every four months from a different agency. Unless, that is, you want to spring for a credit monitoring service.

One more thing, the expiration of either the credit reporting period or the statute of limitations is not going to cause Midland (or any other debt collector) for that matter, to simply give up on that debt. Once you're out of the woods on the lawsuit front, you may want to consider sending a cease and desist letter to put a stop to the incessant collection calls and letters once and for all. And for the love of all that is holy to you, keep a paper trail to back yourself up with the expired SOL/credit reporting period. This is incredibly important if a future collector ever decides they want to reinsert this nastiness into your credit record.

Occasionally I'll put links to other related articles that readers might find helpful at the bottom of certain posts, but the ones I'm including today are specifically related to you and your situation. This post has already become the longest Q &A I've ever done, and I don't want it to turn into a novel. Plus, there is a cheesesteak waiting for me in the kitchen and the very smell of it is fogging up my better judgment.

Best of Luck,

Related Posts:

Send a Cease and Desist Letter to Debt Collectors 

What Are Your Odds of Being Sued By a Collection Agency?

Dealing with Midland Credit Management

Removing Re-Aged Collection Accounts From Your Credit Report

Saturday, May 24, 2014

Why a Pay-for-Delete Doesn't Always Work for Credit Card Charge-Offs

For people under severe financial stress, credit card payments are near the bottom of their list of priorities.
It's all too easy for those who've never experienced being broke to point fingers and call these individuals
irresponsible. In reality, your first responsibility is keeping a roof over your head and taking care of your family. Sure, paying your credit cards late does some damage to your credit scores, but your basic necessities should always take precedence over your credit card payments.

That being said, if you leave your credit card bills unpaid for 180 days, the credit card company will charge off your debt. That doesn't mean you don't still owe the unpaid balance--you do. It simply means the company plans to claim your account as a tax loss.

After the Charge-Off

Credit card companies sometimes sell charge offs to third-party collection agencies. In most cases, however, they simply turn the debt over to an in-house collection department. In-house collections are owned by the credit card company itself. They'll often have different names to make them appear to be third-party collection agencies (for some reason credit card companies think this creates a greater sense of urgency to the consumer) but your debt generally doesn't change hands immediately following a charge off.

Credit Reporting Regulations Make a Pay-for-Delete Unlikely

Now, here's where things get tricky. When you owe a debt to a collection agency you can sometimes negotiate a pay for delete agreement. A pay-for-delete agreement is exactly what it sounds like: you pay the debt, the collector deletes the tradeline from your credit report. Although this practices is becoming less and less common, it still occasionally occurs. Your odds of successfully negotiating a pay-for-delete agreement with a credit card company, however, are slim to none. Here's why.

Federal laws governing credit reporting, namely the Fair Credit Reporting Act, require credit card companies and other information providers to report accurate information. Federal law alone isn't the only thing
Don't get frustrated over the lack of a pay-for-delete
deterring your creditor from tweaking your credit history in exchange for payment.

When any company signs up to become part of each credit bureau's reporting program, they have to agree to follow the company's rules. This means the credit card provider has to report accurate information to the best of its knowledge. Factual reports--even if they're negative--ensure that the credit bureaus can calculate the most accurate credit scores possible. Accurate credit scores help other creditors make the most educated risk-based decisions they can.

The Economic Fallout of Frequent Pay-for-Delete Agreements

A charge-off on your credit report indicates that, for whatever reason, you did not adhere to the terms of the agreement you originally signed up for. This makes you a bigger risk for future creditors. If the credit card company agreed to a pay-for-delete, your credit report would no longer reflect the added risk that you present.

If a credit card company agreed to do this for one person, or ten people, or even 100 people, it probably wouldn't make that much difference. If every credit card company allowed consumers to negotiate a pay-for-delete after a charge off, however, this would have a huge negative impact on the lending industry as a whole. While you may be a responsible person whose charge-off was the result of circumstances beyond your control, there are plenty of people out there who are just irresponsible schmucks. Lenders would suffer significant losses as a result of not having fair warning of these debtors' tarnished track records (Then again, banks seem to be quite adept at making messes all on their own, as we've seen in recent years....)

The end result, of course, is that the lending industry would begin to lose faith in FICO scores as an accurate risk-assessment tool. Consumers who'd worked hard to maintain high credit ratings would lose their access to premium rates because banks couldn't discern whether an applicant's credit scores were accurate or whether they were falsely inflated due to negative entries that were paid off and deleted.

No Credit Reporting? No Credit Building 

In addition, credit card companies are always on the hunt for new customers. They are particularly fond of college-age applicants. The idea is that if the credit card provider can convince a college student to apply for a card, they'll build brand loyalty with that individual and he/she is likely to keep the account open and use it. College students are also primary targets because they're at an age where they need to begin building good credit. If a credit card company loses its right to report consumer debts to the credit bureaus, it will also lose many potential customers who need a credit card in order to build credit.

It never hurts to ask, but don't be too alarmed if your credit card company denies your request for a pay-for-delete for a charge off. If you don't pay the charge off, however, the creditor will eventually sell it to a third party debt collector. When that occurs, the collection agency will add its own tradeline to your credit report and your credit scores will fall even further. Because of this, is a good idea to pay the charge off as soon as possible. Doing so doesn't improve your credit (paid negative items hurt your scores just as much as unpaid ones), but it does keep your credit scores from getting worse--and paid negatives do look better to lenders when they review your entire credit history rather than just your FICO scores.

Thursday, May 22, 2014

Can a Doctor or Hospital Send Medical Bills Directly to Collections Without Notifying You?

No matter how careful you are with your finances, a medical emergency can pose a threat to your credit scores. If a doctor or hospital sends your unpaid medical bills to a debt collector, the collection agency is likely to report those debts on your credit report. Unfortunately, the FICO credit scoring formula doesn't discriminate when calculating your credit scores. Any collection over $100 has the same devastating effect on your credit scores (and sometimes collections under $100 can do the same thing depending on the version of FICO your lender pulls) This means that a collection account for an unpaid medical bill can hurt your credit just as much as a collection for a defaulted credit card.

Every mom in the world is quick to point out to their kids that life isn't fair, but the idea that a medical emergency--something you have no control over--can make lenders consider you just as high
Medical debt can go to collections
a risk as someone who just doesn't pay his bills is really and truly unfair. What's even more unfair is the fact that a hospital doesn't have to give you any notification at all before turning your debt over to a collection agency.

Some Medical Bills Go Directly to Collections

Hospitals are accustomed to billing insurance companies. If you don't have insurance (and yes, there are still plenty of people out there without it) the hospital is supposed to bill you directly. Unfortunately, this doesn't always happen. Sometimes billing errors (or pure unadulterated carelessness) result in you not receiving your bills but sometimes, hospitals send your medical bills directly to a collection agency--without even attempting to get payment from you directly.

Why Hospitals Don't Contact You First About Your Bill 

A hospital may send your bill directly to collections for a number of reasons. The primary reason, however, is convenience. To some hospitals, its worth paying the commission to the collection agency to not have to deal with your account. Billing you directly, negotiating the debt and working out a payment plan all require time and resources on the part of the hospital. It's much easier to simply send the bill directly to a collection agency and let debt collectors do all of the work. This is especially true if you have a coinsurance plan. Your coinsurance has already paid

Another reason a doctor or hospital may send your medical bill directly to collections is that this method robs you of the opportunity to dispute the bill. Medical collection agencies often put extreme pressure on you by giving you a set amount of time to pay the debt before they report the account to the credit bureaus. Once the account appears on your credit report, your credit scores suffer. This limited time frame in which to protect your credit scores doesn't give you the time you need to dispute a medical bills you believe is inaccurate--forcing you to choose between fighting for the correct amount or saving your credit scores.

What Can You Do to Prevent Medical Debts Going Directly to Collection Agencies?

Unfortunately, there are no laws requiring doctors and hospitals to notify you first before sending your bills to collections. Doctors and hospitals are original creditors. This means they aren't bound by the Fair Debt Collection Practices Act, which governs the behavior of all third-party debt collectors.

The best way to ensure that your bills are sent to you rather than directly to a debt collector is to contact the doctor or hospital's billing department and ask about their policies. Make sure that your address is correct in their system and ask if you have any outstanding bills. If you do not, call back a week later and ask again. Keep in mind that, according to your insurance provider's policies, doctors and hospitals can wait up to a year after the date of service to bill you or your insurance company, so don't stop checking up on your debt until the billing office is willing to give you a zero balance statement, in writing, for the medical services you received. In the event a collector tries to collect the debt from you in the future, a zero-balance statement from the hospital is your greatest armor against the collection agency and any potential credit damage connected to your previous medical debt.

Related Posts:

Keeping Medical Debt Out of Collections and Off Your Credit Report

Reader Question: Medical Collections Never Sent Bill

Tuesday, May 20, 2014

How Do I Pull My Boyfriend's Credit Report?


How do I pull my boyfriend's credit report? This is really important. 

--Jennifer S. 


I hope what you mean to ask is, "How do I help my boyfriend pull his own credit report?" Because before we go any further with this I am obligated to tell you that pulling someone else's credit report without their
Credit stalking isn't love, its illegal.
knowledge and permission is credit stalking and it's against federal law. Even big companies can get into severe trouble for doing it. It simply isn't worth a federal crime to satisfy your curiosity. You need "permissible purpose" to access someone's credit information.

That being said, since you said "boyfriend" and not "ex-boyfriend," I am going to assume that you aren't a credit stalker but rather a conscientious girlfriend trying to help the man she loves verify that his credit is accurate before he tries to buy a car or get a new apartment. Unfortunately, you still can't do this alone. You can walk him through the process, but this is something he has to do for himself.

That being said, tell your boyfriend to go to Click the option to order his free
credit report and follow the online prompts for information. This is the only website that allows consumers to get truly free credit reports without having to provide a credit card number or join some kind of credit monitoring service (Translation: tell him not to bother trying to pull his credit reports from the credit bureaus).

He'll have to answer a series of prompts and multiple choice questions about different accounts he holds. This is the part that usually trips up anyone trying to do a bit of credit stalking on the down low. Once he's answered all the questions accurately, he can view and print his credit reports from all three credit bureaus.

Tell him his credit scores are not included in his free credit reports. If he wants his real FICO scores--the kind lenders use--he'll need to buy them from the Fair Isaac Corporation at

And one more time, just in case anyone missed it, federal law prohibits credit stalking! No matter how curious you are, don't pull your boyfriend's or girlfriend's credit report unless you are merely helping them do it themselves!

Best of Luck,

Tuesday, May 13, 2014

Q & A: Should I File Bankruptcy Over Credit Card Debt?

QUESTION... I am delinquent on quite a few credit card accounts... I've been trying to keep up with the payments, but it has just gotten out of control. To the extent of over $50,000. I have one card that has contacted my mom, dad, sister and close friend. This is a jewelry store credit card that I made purchases on and never made a payment. I'm thinking of filing for bankruptcy... seeing as my only income right now is Social Security Disability. I have tried to keep current, but I just can't stay afloat any longer.


I'm not sure if your question is whether or not collectors can contact your family members, what rights you have if they do so or whether you should go ahead and file bankruptcy over this credit card debt, so I'll try to address all three. 

Debt Collectors Calling Family Members 

For starters, third party debt collector can only call your family members in an effort to track you down. They do not have the right to inform your loved ones about your debt or disclose any other sensitive information about your debt to a third party such as a family member, neighbor or employer. This excerpt from Section 804 of the Fair Debt Collection Practices Act which governs third-party collection agencies makes that abundantly clear: 
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall -- 
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt

However, if the credit card companies you owe have not charged off the debt yet or have turned the debt over to an in-house collection agency (one owned by the creditor) the FDCPA does not apply. That doesn't mean that the behavior isn't illegal in your state--it very well may be--but it doesn't violate federal collection regulations. 

Potential for a Debt Collection Lawsuit

If a collector can't coerce you into making payments on your debt or--God forbid--turn over your banking information, it may file a debt collection lawsuit. If the company wins, the court grants it the right to forcibly make you pay by doing things like garnishing your paycheck, levying your bank accounts and putting liens on property you own. Not all debt collectors sue but, the more you owe, the higher your odds are of being at the receiving end of a lawsuit. Although your $50,000 debt is distributed among several credit cards, the amount is still high enough to put anyone at risk of a lawsuit. 

I do, however, have some good news. Because your sole income is Social Security disability you're safe from either garnishment or a bank levy. Social Security disability payments are one of the many government income sources that are protected from seizure by commercial creditors. If they threaten to sue you, letting them know that your sole income comes from Social Security and that you don't own any property (or do you?}may just be enough to make them back down. If a debtor is "judgment-proof," the collection agency is doing nothing but wasting time and money to pursue a debt they cannot collect. 

Don't be surprised if they sue anyway. Like I said before, $50,000 is nothing to scoff at. There is a statute of limitations for lawsuits and, as long as they win a court judgment before that statute of limitations expires, they can renew the judgment (you don't mention your state of residence, but judgments are often valid for about a decade) and wait for you to either get a job with actual wages they can garnish or start depositing non-exempt funds, such as monetary gifts, the proceeds from a small loan, tax refunds, etc, into your bank account for them to seize. So if you plan to come off Social Security disability at some point in the future, an old debt collector's judgment could come back to haunt you. 

Filing for Bankruptcy Over Credit Card Debt 

Anyone whose read this blog for any length of time can tell you how opposed I am to people in most situations to file for bankruptcy--especially people who are essentially judgment proof. Let me state for the record that I am no a bankruptcy attorney. Laws can and do change all the time, so if you decide bankruptcy is the best course of action you need to schedule a consultation with a licensed bankruptcy attorney in your area. 

That being said, if you meet your state's income requirements for filing Chapter 7, the whole process could be over in as little as three months and you could breathe easy without $50,000 in credit card debt hanging over your head every day. Although bankruptcy trashes your credit report for up to ten years, so does a judgment--and the judgment doesn't bar debt collectors from pursuing the debt any further like bankruptcy does. 

Bankruptcy has its drawbacks too. Depending on your state's exemptions, you may have to turn over some of your assets to the court when you file Chapter 7 bankruptcy. Although Chapter 13 lets debtors keep their assets provided they follow a strict repayment plan, individuals on Social Security often don't have enough disposable income to propose an acceptable repayment plan--making Chapter 7 their only bankruptcy option. 

A licensed bankruptcy attorney in your area can evaluate your situation and help you come up with the best possible course of action. You may even want to talk to a consumer law attorney in your state first. Not only is a consumer law attorney more likely to be unbiased about bankruptcy and help you explore your options objectively, he or she can also help you file a lawsuit if the collection agency that simply couldn't stop calling your family was violating the FDCPA by doing so. 

Best of Luck,