Have no idea what to do now

More than likely they still won't delete the tradeline. Updating it to paid provides no benefits, as long as you keep the letter from them, you can provide proof that it was paid to any company who wants the debts to be paid...

Here's the problem... If the debt was sold, the OC technically couldn't have received the payment because they had no further interests in the debt...

 

That's what they don't tell you... and what they don't want you to know.

They tell you that paying them makes your credit better, all it does is change the CO to a PAID CO, which still has the negative report, and potentially updates the date of the last activity, which could make it even a more recent negative then the original CO.

See; when the JDB paid them the pennies on the dollar, the OC wrote off the remainder as a loss... The JDB now owns the account... The OC got their $, (a) from the JDB, (b) from the IRS... NOW, they also have it (c) from you...

Now, they are supposed to report to (a) and (b) that they got it from (c); buy the account back from the JDB, and pay the IRS the taxes on the amount that they got as a loss on their corporate taxes.

But why do that as long as (a) and (b) will potentially never find out that (c) paid them directly.

 

That's not all they are supposed to do.

That's not the end of the story. They are also supposed to file an IRS 1099-c on the charged off amount as per 26 U.S.C. 2650-P and mail you a copy of the 1099-c they filed. Failure to do so can result in fines ranging from $50 to $250,000 if they get reported. Debt collectors may not report unless they happen to know that the original creditor did not comply with the law.

There is also a potential danger to the taxpayer if they file a 1099-c and don't inform the taxpayer and a false 1040 is filed as a result of their failing to inform the taxpayer. The penalty phase of 2650-p went into effect as of January 1, 2006.

This isn't really anything new at all since 2650-p went into law several years ago but the IRS didn't put the penalty phase in effect until January 1, 2005 and that gave them until February of 2006 to be in compliance. Now we are a year into the penalty phase so if they don't provide you with a 1099-c by February 2007 they are theoretically in real bad problems.

I haven't heard of anyone getting slammed yet but it is probably due to happen sooner or later. IRS wants the taxpayer to call up and complain that they didn't get their copy of a 1099-c so they can find out who is naughty and who is nice.

 

Using it against them?

You can't really use that against them. The only way to "get even" would be to call 1-800-1040 and report them to the IRS for failure to comply with the law.
That won't do you a lot of good and might even cost you some extra taxes but the real downside of it is the possibility that IRS will come after you for failure to file a correct tax return or something. The only real point is that enough people report these companies they might end up getting hit with the big $250,000 fine. But it won't really do you any good.

There isn't any technicality here. Your agreement with the creditor said you agreed to pay any and all collection costs including costs incurred if they turned it over to a 3rd party for collection. The thought that you don't have to pay the debt collector is nonsense.

Bud Hibbs and others try to teach that we don't have to deal with debt collectors. That's just one of the reasons why Bud Hibbs is considered to be one of the most dangerous teachers in America. The real truth is that in most states debtors are far better off dealing with 3rd party debt collectors than they are dealing with their original creditors. Another reason Bud Hibbs is considered to be one of America's most dangerous teachers is that in teaching that we should never deal with debt collectors he is teaching us to renounce our rights to redress for abusive collection practices under FDCPA.

Why would we want to give up our rights under the law as suggested by those who teach that we should never deal with 3rd party debt collectors and deal with those who can abuse us at will without being subject to the law?

Validation is really a very simple process that has been made needlessly difficult to understand. In reality it is nothing more than a demand that a 3rd party debt collector provide the consumer with all of the information he would need to dispute the debt or any portion thereof as is provided for under FDCPA. The so called "mini-miranda" warning plainly states that we have the right to dispute the debt or any portion thereof and it should be obvious to all that the only entity that has the information which would allow us to avail ourselves of that right is the original creditor. So demand for validation is nothing more than a demand for information unless we make the further statement in our letter that we dispute the debt and each and every portion thereof.

Until we make that statement we have disputed nothing at all. If that statement is not included then we have not even reserved our right under FDCPA in a timely manner. Without that statement we cannot really claim to have demanded validation within the 30 day period allowed us to dispute the debt or any portion thereof. Without that statement included we have only asked for information.

That's the way I see it.