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Discussion in 'Credit Talk' started by tltrader, Jul 24, 2001.
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You may be able to get their negative entry removed (the CA's entry, if it exists), but it's unlikely that you can get Discover's entry changed or removed through them.
The negative tradeline is from Discover. The CA hasn't reported anything. But their letter states that they are authorized to settle the account on behalf of Discover. Therefore, if they accept an offer that requires the removal of the negative Discover tradeline, I would think that Discover would be bound to do so since they authorized the CA to negotiate a settlement.
I doubt they will - Discover is a stickler on reporting accurately - charge-off, settled, sold, etc.
You're right on the money about the collection agency acting as an agent of the creditor, and any commitment made should be binding... BE sure to get it in writing first!
It can't be reaged - they can try to, but as long as the date of first delinquency can be shown (1st statement with a past due balance works) then it's easy to dispute with the bureaus.
One more thing I thought of -- and you'll need to talk to a lawyer on this -- I'm not sure about how the tax implications work for a charge-off vs. settlement. That is- if you settle for 30%, the creditor is supposed to file a 1099 w/the IRS showing a forgiven debt, and you owe taxes on that amount. I'm not sure how that process works with a charge-off?
Thanks for all your replies.
Unfortunately. I can't wait this one out. We're going for a mortgage and the lender I'm working with doesn't want to see unresolved charge-offs (this is the only one we have). In addition, I suspect if I dispute with the CRA's that it will come back verified since the CA involvement is current. Also, we made some small monthly payments to Discover about a year ago (bad move, I know) so we probably re-aged the account.
Back to my original post, has anyone had better success in a situation like this by having their settlement offer submitted by an attorney? I still believe that if I word my offer correctly that Discover will be legally bound by anything that the CA agrees to.
The only thing I've seen help is to have the account in dispute.
For example, if you think a charge or 2 wasn't right, interest was calculated wrong, fees were wrong... you can dispute the veracity of the account.
Disputing the validity of the debt allows the collection agency more wiggle room.
Eg: a debt in dispute can be settled for less than the full amount AND there is no tax implication (because the balance is in question)
a debt can also be settled and all credit reporting info can be removed because there's an issue with the truthfulness of the debt. It gives the ca a reason to remove the tradeline and not violate their agreement w/the CRAs.
Now we all know they remove for money all the time, but if the account isn't in dispute at all it does violate their agreement w/the CRA on accurate reporting. A lesser crime to the CAs than not getting their money for you.
Anyway, I have found if you ask for validation, dispute the amount, dispute the dates, interest calculations etc... it gives you some leverage at least. Course, with a mortgage issue they know they have YOU over the barrel, so you need to try and rebalance the playing field.
I don't quite get this 1099 bit !
Didn't you allready pay income tax on the money you pay a debt with?
If you settle the debt, the unpaid portion (the part forgiven) becomes taxable income.
eg: you owe 1000 and you admit it's all yours. But, the Collection agency settles with you for 500.
You pay 500. Now, the other 500 they "forgave" becomes taxable income to you... like you got it in interest or something on investments.
So you pay taxes on 500 more income. that's reported on a form 1099 misc. For miscellaneous income.
Hence all the discussion on tax implications of settling an account.
I believe I'd bypass the collection agency (they'll say anything to get your money. More than likely, they ARE NOT acting on Discover's behalf, but rather have already purcahsed the debt for cents on the dollar--yes, even if it doesn't say "sold" on the credit report.)
My thinking is that if you can afford the muscle of an attorney, then given your urgent turn around time, don't waste it on a CA. Instead, have the attorney go back to the original creditor -- Discover -- with your offer, even if it costs you more that 30%.