Original Creditor or Collection Agency Forged Signature on Documents. Now What?

Hi Lee,

Your blog is wonderful, thank you. And, I REALLY need your advice.

I have a $3,100 bill from OC for a business debt that the company claims I signed a PG. I told them I didn't PG and it wasn't my responsibility. In 10/2012, they dinged my credit.

I'm currently refinancing a large jumbo loan and it appears the OC now either sold or hired a CA to collect. The CA has now dinged my credit, and the amounts are slightly different and it appears as 2 separate debts.

I spoke with CA and they provided me with the contract and I believe my signature was forged. 

However, because of the size of the loan and the dramatic payment reduction I will receive monthly, I simply need this taken off my credit immediately, and would be willing to pay for delete if I could get this removed. However, based on this blog I don't suspect this will be a possibility. In addition, if the CA agrees to PFD how can I get the OC to remove the entry?

Is there another option? Time is of the essence, so hiring an attorney and filing suit over $3,100 is not a good option either, IMO.

Please advise, thanks!

---Anonymous

Anonymous,

First of all, thank you for the compliment. If this blog has helped even one person, all the effort has been 100% worth it.

Now, for the meat and potatoes of the problem...even if the collection agency agreed to a pay for delete (and you never know, they might. $3100 is nothing to sneeze at), you couldn't get the original creditor to delete its entry. The pay-for-delete only works for the collection agency. The original creditor doesn't benefit and, as a result, its entry will still remain for the full reporting period. Unless, of course, you become a financial and/or publicity threat to the company. There are three ways I can think of to take care of this problem without following through with a lawsuit. Keep in mind, this is just what I would do if I were in your situation. This does not constitute legal advice.

Potential Solution #1

If you know for a fact that you didn't sign a personal guarantee and your signature was clearly forged, this is fraud. A handwriting expert would quickly be able to tell whether the signature was a forgery or whether you signed it and simply forgot (even when we sign things in a completely different way, there are still personal handwriting markers that remain). You and I both know that you don't have the time to deal with a messy lawsuit right now – but neither the original creditor nor the collection agency know that. And this is to your advantage.

If it were me, I'd hire a handwriting expert to analyze both my signature and the signature on the personal guarantee. If he/she finds that the signatures were made by two different people, ask the handwriting expert to put those findings in writing. If you're having trouble locating a handwriting expert, check with the closest university.

Now its time to take a trip to an attorney's office. Don't worry, you don't have to sue, you just have to put together an airtight and scary-as-hell threat. Explain what's going on to the attorney and ask to hire him/her to notify the collection agency and original creditor of the handwriting expert's findings and demand that they cease collection efforts immediately and remove all negative information connected to the fraudulent personal guarantee from your credit report. Provide the attorney with two copies of the handwriting expert's letter. Along with his own letter, he'll need to send a copy of the handwriting expert's findings. This demonstrates to the original creditor that you have proof against them. If you have proof and they have nothing but "But she/he signed it, your honor. Honest!" then you're more trouble than you're worth. They won't want that to go to trial.

It could be a problem if the OC is unorganized and careless. Then the threat may fall through simply because one hand doesn't know what the other is doing. That's always a possibility. You, however, will come at them with two things that give any company pause – legitimate proof of wrongdoing and an attorney. Nothing says "I mean business" like a lawyer touting proof of fraud.

You may run into an attorney who insists upon actually suing the company and who refuses to send his own demand letter coupled with the handwriting expert's findings because he claims it won't work. If this happens,  watch out! If you have a solid enough case that the attorney wants to take it to trial, then you very clearly have a solid enough case to attempt to resolve the issue outside of court. In this scenario, its very likely that the attorney knows a good case when he sees it and wants to convince you to sue because he'll make more money from a lawsuit than a letter. The good news is that, since attorneys who play in my field make so much less money than, say, a corporate attorney or defense attorney, they often legitimately want to help people. I'm just saying watch out for dishonesty in the legal profession. I guess that's akin to saying "Watch out for sharks in the ocean," huh?

Potential Solution #2

Although you have no desire to deal with a lawsuit right now, that doesn't change the fact that, with a forgery, you have every right in the world to file one. Solution #2 requires that you use your handwriting expert's analysis to file a lawsuit for fraud against the original creditor and/or collection agency. It's important not to focus solely on the original creditor just because they are the ones whose documentation reflected the forgery. If you request validation, the Fair Debt Collection Practices Act dictates that a debt collector cannot pursue further collection activity until it provides that validation. And guess what? It isn't unheard of for debt collectors to forge debtor's signatures on documents. The forgery could have been born anywhere.

Neither the original creditor nor the collection agency wants to go to court. They don't like going to court for frivolous lawsuits and they hate going to court to defend themselves against a claim as serious as fraud--especially when the plaintiff has an expert providing him/her with solid documentation that supports that claim.

It's very likely that both the original creditor and the collection agency would decide that removing that $3100 debt from your credit report is a lot cheaper and less time-consuming than bringing in an attorney and defending themselves against a claim of fraud. I've seen collectors back out of lawsuits that had a lot less merit and delete their credit report entries simply to spare themselves the time and money required to successfully defend against a lawsuit. You don't have to have an attorney to do this, but notification from an attorney packs a much scarier punch that a lawsuit you file on your own.

The only major issue that comes into play here other than time is money. Handwriting analysis isn't cheap and neither are lawyers--even if you only use them for a short period of time. Unfortunately, the cheapest way (filing this lawsuit yourself, going to court, requesting discovery documents, etc.) is the most time-consuming and you'll have to sacrifice money for time in order to get the credit problem taken care of so that you can refinance your home.

Potential Solution \#3

Report all of this to your attorney general and ask for help. Send a copy of the forged signature and your real signature. One well-placed call from the attorney general can usually make the bad guys go away--at least for a while. Also, file an online complaint with the FTC on both the original creditor and the collection agency. While the FTC won't settle your claim for you, they will investigate if they get enough similar complaints.

I understand your urgency to get this taken care of to ensure that you can refinance your home, but even if things go well there is no guarantee that this issue will be cleared up by closing. I would consider putting off refinancing until after you've cleared up this mess. Without the time constraint looming over you, you'll have time to aggressively pursue the lawsuit that you so desperately deserve to file. These people should not be allowed to get away with this.

Best of Luck,

Lee

Does Loan Modification Hurt Your Credit Scores?

When you can't afford to make your house payments,  loan modification could be the answer to your mortgage woes. In a nutshell, loan modification lowers your monthly payments by reducing your interest rate, reducing the principal of your loan or extending your mortgage's repayment terms. When the government first began pushing loan modifications midway through the recession, banks weren't exactly on board. Granted, they went through the motions because they had to, but people who met the qualifications for a loan modification often ended up losing their homes to foreclosure due to their bank's incompetence (or carefully orchestrated sabotage, as some believe). Luckily, banks don't fight loan modifications like they once did. That doesn't mean, however, that the process isn't still fraught with problems. In some situations, a loan modification may help you keep your house but hurt your credit scores in the process.

Loan Modification and Missed Mortgage Payments

If you think the government's loan modification program the Home Affordable Modification Program or "HAMP" is the only loan modification available, you'd be wrong. Some banks have their own modification programs they use to help keep homeowners in their homes. HAMP doesn't require you to miss any mortgage payments before your trial modification begins, but if your bank uses a private modification program, it can require that you fall behind on your payments before changing the terms of your loan.

Fill out modification app as soon as issues arise.

Missing payments – especially mortgage payments – is disastrous for your credit scores. If your lender requires you to be, say, 90 days' late before you can qualify for a loan modification, you can expect your credit scores to take a nosedive. Your payment history accounts for 35% of your credit score, and missing a single payment could shave over 100 points from your score. Everyone is different and the exact formula is a secret so there is no way to know how much of a hit your credit will take. This much we do know: when you stop making payments to your mortgage lender – regardless of the reason – your credit will sustain serious damage.

Trial Loan Modification Coding Problems

Before you are eligible for a permanent loan modification  you must prove to your lender that you can comfortably afford the new payment. Thus, most programs require that you make timely payments on a temporary modification before your new payment becomes permanent.

Banks report the payments you make to the credit bureaus using a code. Until recently, there was no code for trial loan modification payments. As a result, banks reporting trial modifications as partial mortgage payments. Not paying the full amount you owe makes you appear irresponsible with money and will result in credit damage. Although a trial loan modification code now exists, there is no guarantee that your lender will use it. Thus, its imperative that you keep an eye on your credit during a trial modification allowing you to catch any coding problems early on and fix them.

Loan Modification Impact and Credit Report Removal

If you haven't missed any payments and your bank codes your payments properly when reporting them to the credit bureaus, your credit report may not be affected by the loan modification.  If your credit score is adversely affected, however, take comfort in the fact that the damage isn't permanent.  After 7 years, any credit damage you sustained in the attempt to save your home will be removed. As long as you continue to pay all of your creditors on time during this period, you can expect your credit score to increase significantly after the credit bureaus remove the loan modification from your credit report.

Related Articles:

How a Trial Loan Modification Affects Credit Scores

What is a Key Derogatory on Your Credit Report?

How Much Does One Collection Hurt Your Credit Score?

What Happens If a Collection Agency Sues You and Wins?

Debt collectors love to threaten debtors with lawsuits. It's the ace up their sleeve. It seems to be ingrained in the psyche of every American to fear lawsuits the way some dogs fear thunder. When you hear that word,

you just want to go hide under the bed and shake until its all over. Most of the time, the collection agency doesn't actually sue--they just threaten to. Granted, the Fair Debt Collection Practices Act makes it illegal for a debt collector to threaten to do something they have no real intentions of doing, but you can't exactly prove someone else's intentions in court. Collectors know this and use it to their advantage.

But what happens if the collection agency does sue? Lets go over some of the potential consequences of a collection agency lawsuit.

Wage Garnishment

This is a fairly common consequence of a debt collection lawsuit. If the collector knows where you work, they can obtain a wage garnishment order through the court and serve it on your employer. Your employer can't fire you just because it received a garnishment order (that's discrimination) but if you already have a garnishment order against you, say, for child support, and your employer receives a judgment garnishment, they're well within their rights to send you packing.

Some people avoid wage garnishment by switching jobs each time a garnishment order goes through or simply by being unemployed (the most effective way is by being self-employed, but we're not gong to go there today). Keep in mind, however, that an aggressive collection agency can call you to court for a post-judgment interrogatory and force you to disclose your employer.

Property Liens

Own a house? Own a car? Watch out. Collection agencies can use their judgments to place liens against property you own. This prevents you from selling the property without paying off the lien. Of course, in some cases, collection agencies use their liens to seize the property, but these situations are still thankfully few and far between. If you have a mortgage or auto loan, your property is probably safe from seizure, as the

Own a house? Watch out for property liens.

collector would have to pay off your existing lien before it could apply any proceeds to its own debt.

Bank Levy

Just like a collection agency with a judgment can force your employer to garnish your paycheck, it can also force your bank to hand over any money you hold in checking or savings accounts. Certain funds, such as retirement money, unemployment, child support, etc. are exempt, but a collector can generally seize any and all non-exempt funds your account contains--even if doing so takes your account down to zero. And if you happen to have a joint bank account with another individual, that person stands to lose their money too. Even in states that protect joint account holders, only half of the money is typically protected.

The worst part of a bank levy isn't the fact that a collection agency can seize every penny. It's the fact that they can execute the levy over and over again until you either switch banks or the debt is paid in full. While switching banks will give you momentary relief, the collector will eventually find you and levy your new account. If it can't track down your bank account, it can drag you back to court and force you to disclose your new bank to a judge. Ouch.

Credit Damage

If the financial consequences of a collection agency lawsuit weren't bad enough, you'll have to suffer the credit consequences as well. You already know that a collection account deals a significant blow to your credit scores. Fortunately, that account can only remain on your credit report for 7 years and 180 days from the date you stopped paying the original creditor.

If the collection agency sues you and wins, however, a civil judgment shows up on your credit report. A civil judgment is a public record, just like a bankruptcy or foreclosure, and deals some serious damage to your credit scores. Unlike collection accounts, the reporting period for a judgment isn't retroactive. It begins the date the judgment is entered. Your state's enforcement period dictates how long a judgment remains on your credit report. If the enforcement period is less than 7 years, the credit bureaus remove it after 7 years. If the enforcement period exceeds 7 years, (and most do) the judgment remains for the full enforcement period. In other words, a collection agency's judgment could haunt your credit report for a decade or more.

Long story short, if a collection agency sues you and wins, you're in a world of hurt. This is why its so crucial to seek help before things reach this point and to learn how to defend yourself in court if a collection agency follows through on its threats to sue.


Related Posts:

The Debt Collection Lawsuit Threat

Funds Exempt From Bank Account Garnishment

Make Yourself Judgment Proof