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URL:  https://boards.fool.com/aj485-port0703-wrote-i-owed-a-credit-card-30238962.aspx

Subject:  Re: Debt Settlement - Danger? Date:  9/2/2012  1:36 AM
Author:  joelcorley Number:  305845 of 312949

aj485,

port0703 wrote, I owed a credit card company $16,381. The credit card company’s collection
agency sent me a letter confirming that “…it is duly authorized to accept $6,825 in full settlement of the debt”, provided that my payment reached the collection agency’s office within a week. Earlier today, so as to comply with the deadline, I sent a $6,825 check by mail to the credit card collection agency.


To which you replied, Well, there are lots of questions that I would have about if this really is the "credit card's collection agency" or if your debt got sold to the collection agency. But those are questions that should have been asked before you sent the check off, so the questions aren't really relevant now. There are also questions about how the original account and the collection account will be reported on your credit history, but since you already sent the check, you've lost any leverage that you might have had there. For lurkers, or if you want to settle any other debts, I would suggest getting questions like those answered BEFORE you send any checks. If you don't want to come here to ask the questions, you can try looking for information on debt collection and credit reporting on www.creditinfocenter.com, www.creditboards.com or www.myfico.com, among others.

I would argue that these questions are still relevant - even if port0703 can't use the FDCPA to answer them now. The problem is that it doesn't sound like port0703 had the collection agency prove that the debt was actually owned by the collection agency and/or they had the right to act on the credit company's behalf.

No collection agency I've heard of offers proper proof of agency or ownership unless challenged. However failure to show proper proof of ownership or agency leaves you open to scam artists. While it is illegal to access consumer credit reports without permission - thieves do just that all the time. And once they have your credit report, any scam artist can attempt to collect on a bad debt by supplying you with key facts found on the report.

That's not to say port0703 was scammed - s/he probably was not - but when else would you accept the word of a stranger that he is authorized to accept payment of the sum of (nearly) $7,000 on behalf of someone you owe? I mean, my God! $7,000 isn't chicken feed! That's serious money!

Let's say someone sent me a letter saying they were collecting a debt from say Citibank. I'd want a letter directly from Citibank showing this individual or company now had ownership or agency. And I'd want to be able to verify this documentation through a publicly available method - such as calling Citi's main number. Even then I'd want to try to deal directly with the original lender (by sending all checks and correspondence through them) rather than deal with the collection agent. The only exception to that might be if Citi had previously sent me a notice of the obligation being sold - something that never seems to happen with credit cards debts.

Why am I so wary? Simple. Once someone cashes that check, the money is gone and you'll never see it again. If that someone isn't who they say they are, you've just been robbed of (nearly) $7,000. Loosing $7,000 that way would hurt. A lot. It would hurt me, and I could probably afford write a check for the original balance. I can't imagine how much a loss of $7,000 would be to someone that had been struggling to pay their bills...

Even now, I would say port0703 should be following up with the original credit card company to see if this was legitimate. The sooner the better. If it was not legitimate, the quicker they act the more likely they can recover the funds. Of course if the check has already been received, it's probably already been cashed too. And if it's cleared their account, they can't use a stop payment on the check ... and that would place any hopes of recovery on a police department in some far away jurisdiction.

Being responsible (and Foolish) doesn't just involve paying your bills. It also includes not being too trusting of other people when it comes to the money you have...

- Joel
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