What we’re going to talk about today
is why we tell people, never pay a debt collector and what specifically that
means. In a conversation when I talk to someone, typically they say, “oh I’m
about to pay off all my debt collections,” and they think that their credit is going to be
raised by paying off debt collection accounts. Well for one, paying off a debt
collection does not remove it from your credit report! So, they have to
make sure that the debt collectors are following specific rules and when I say
don’t pay a debt collector, it does not mean that you never have to pay it and
it does not mean that you would ever stop paying other bills like your credit
card or your car loan or anything like that. It also does not mean that the
debt collector cannot sue you. So, within six years of the time that the account
got sent to the debt collection agency they can legally sue a client, but
through our process we make the debt collection agency prove that they have
all the correct information and make them prove it’s a valid account. For example if I have
a debt collection account for four hundred bucks and I rush to pay it,
it’s not going to come off my credit. It’s going to update and sometimes it
will report for seven years from the date of the payment. It reports
as a paid collection. Through our process the debt collector has to prove
that they have the right to report on your credit. When we’re requesting
information from them they have to show documents with the client signature, They
need to show all of the documentation they have that really proves that
the client owes that debt and they need to furnish all the documentation to
prove that and to show that. It’s like when you go to court and you file a discovery
they have to show all the evidence. The credit reporting system is quite
unfortunate because it’s a “guilty until proven innocent” and through our
process we’re forcing the debt collectors to prove this information. so
they need to prove that the debt is valid and collectible, meaning
that it hasn’t been past seven years – the federal statute of limitations and
actually in Washington State it’s six years so after six years a debt
collector cannot sue a client. I know a little earlier I made it sound like
from the time the debt collection agency acquires the account, but it’s actually
six years from the date of the initial late payment on that account
that led to it being sent to collections. So they can wait six months or three
years to send it to collection. Student: “I have a question.” Student: “So basically limits you said I’m going to try to make sure I heard correctly. You said when
they reported, that it’s the first time they report.” Jesse: “It’s not when they purchased the
debt collection account, it’s the date of the initial debt. Say I owed Chase Bank right and
I default on that credit card, well it’s the first late payment that led to that
card being charged off. So it’d be the first 30 day late that reported that you
see it on the credit report and it just continues to go 60 days 90 days 120 days
charged off. But it’s from that first late payment, so six years is the state statute of limitations
in Washington state where we’re at. Seven
years is the federal statute of limitations. So after six years from that initial late, they cannot be
sued. After seven years, it cannot report on their credit. So the law states that it’s seven years from the date of last activity so that’s
where that payment can come into play and can be counted as last activity. So
when we’re telling a client never pay a debt collector, it’s mainly because; 1.
Paying doesn’t remove it. 2. The debt collector has to furnish all the proof and the burden is
on them after a client has hired us to deal with their credit. The debt
collection agency has to prove that they have the legal right to report on the
credit that they have all the correct documentation and that everything is
reporting accurately. If they can’t prove it, it has to be removed from the credit
report, by law. So they might not take it off real quick and easy, they might
send all the paperwork back and continuously send it, but if the paperwork’s not
correct, then there’s more disputable reasons why we can get that account
removed. So really this is just to clarify because a lot of people think
I’m saying don’t pay your debt, that’s not true you want to pay your debt,
because that’s part of building your positive credit history. But when I say
don’t pay a debt collector, it doesn’t mean that you’ll never pay them. But it
means through our process, we want to have that debt collector hold the burden
of proof and we want them to prove that all the information on there is accurate
timely and verifiable. If they can’t do that, they have to remove it from the
credit report. Now if they remove it from a credit report technically that clock
is still ticking for the six-year limit for them to be sued. But if the debt
collector doesn’t have the right information to prove that the client
owes that debt, how are they going to prove it in court? So it’s very rare, but
still possible, that we see a collector come after a client after the
information has been removed. Any questions? Student: “Does this fall along the lines of consolidating debt?” Jesse: Consolidation of debt would
be a little bit different, that would be more like I have a two credit cards that
are nearly maxed out and I want to get a consolidation loan. That would be
taking those two credit cards and putting them into one loan that has a
lower interest rate. Consolidation loans will allow you to consolidate debt
collections into it. But again, paying that debt collector doesn’t remove it
from the credit and there’s really a minimal increase when that debt
collection updates to a zero balance. So I wouldn’t recommend people include debt
collections in their consolidation. Right now really we’re averaging
about an 85 percent deletion ratio with collection accounts, because a lot of
them aren’t actual debt collectors they’re debt scavengers or junk debt buyers. So
again, say I chase a thousand bucks on a credit card and then Chase charges it
off. Chase gets a tax write-off for doing a charge off, it means that they
took a loss. Then you know they have policies and insurance in place to
protect them when things like that happen. They will take that debt and sell
it for pennies on the dollar to a debt collector. When that debt collector buys that thousand-dollar debt, they include fees and interest and all kinds
of junk on there. When you pay them, Chase isn’t getting any money, it’s all
going straight to the debt collector. That’s giving these debt collection
agents huge commissions. I mean those guys that call you on the phone, the
reason they’re so aggressive they’re commissioned based employees and there’s
huge Commission in there on junk debt. So really, we we take it and put the
burden of proof on them and that’s why I tell people to never pay their
debt collection accounts unless they give them a letter saying that when once it’s
paid it’s going to be deleted from your credit report. And/Or they have
furnished all the required documentation. Please Subscribe Subscribe Thank you!