How Debt Gets to Collectors – Legal Consequences
When you become late on one credit card – your rates immediately jump up on ALL you credit cards. Including promotional zero-interest cards. And sometimes this goes retroactively back in time. Credit card companies explain that they can do this because you become a “high risk”.
As of today (beginning of 2009) late fees and over-limit fees are by far the single biggest profit center for credit cards (more than $4 BILLION annually). Those fees have now gone as high as $43 on some credit cards, with the average between $35 & $39 by most major issuers.
And unfortunately the lenders can legally do this – so pay close attention to your payment due dates. For more information visit http://www.101creditrepair.com
As you miss payments – this gets reported to CRAs (Credit Reporting Agencies). And the lender will start contacting you (either directly, or via a contracted collection agency).
If you miss the due dates on three payments, the lender will usually shut your card off, declare it in default and make demand for payment in full. Your rates and late payment penalties can quickly make your balance grow by 50% or more.
If you don’t pay for 180 days – they will charge-off your account so that they can get tax benefits for it. They will also turn over to collections. Usually just sell for 3-4 pennies on a dollar.
VERY IMPORTANT: keep records of all letters you get (bills, collection letters), especially the proof of the charge off date or date of last activity as reported to the credit bureaus by the original creditor, so as to legally ascertain when your state statutes kick in. The best way to legally document this is by obtaining a copy of your credit reports that denote this fact, which could become an important document in future disputes or legal proceedings. Keep the report for several years (7 years).
Note: the charge-off date determines two very important date marks for you:
1. how long the debt record will stay in your credit file (usually 7 years from this date).
2. the statute of limitations (SOL) date: how long the debt can be collected. It depends on the type of the debt and on state. Usually 4-6 years. Each state has its own rules.
For more information visit http://www.101creditrepair.com/resources
Note: Collectors can not change the date – re-aging of accounts is prohibited by law. But be careful. If a collector sues you on an “expired debt” (”Time Barred Debt”) – you still have to go to court to protect yourself. If you don’t show up – the collector wins “by default” – and now you will have to pay this debt plus legal fees plus you will get a new bad record on your credit report about the judgment – which will stay for 7 years.
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