Advice on debt collections after settlement

We received a letter trying to collect on a debt that we thought we had settled a year ago. What should we do?

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Bill's Answer: Answered by Mark Cappel

Due to the size and complexity of the collections apparatus used by most large banks in the United States, the situation you describe, in which an account the consumer previously paid suddenly pops up to haunt them a few years late, in a quite common occurrence.

Thankfully, the law is on your side in this situation. In addition, banks are generally aware of this problem, and therefore tend to concede the fact that the account was settled with sufficient pressure from the consumer. From my experience working with similar issues in the past, resolving these problems with the banks requires a lot of pressure from the consumer, as the banks would rather ignore the issue and continue their standard collection efforts. While I do not think that banks intentionally keep settled accounts open to try to collect more money, in those cases where accounts are accidentally left open, many collection agencies have found that by undermining the consumer?s confidence in the negotiated settlement, they can often convince consumers to pay off the same account twice. For this reason, I encourage you to conduct all correspondence regarding this account in writing; this will this prevent heated conversations with collectors that are rarely of any benefit, and will provide you with a written record of all exchanges with the creditor in case the creditor files a lawsuit against you to try to collect the debt.

As I mentioned previously, the law is on your side in this situation, regardless of what the creditor may have stated. The agreement that your representative, the settlement firm, negotiated with Bank of America?s attorneys represents a legally binding contract. Assuming the settlement firm made payment as required under the terms of the agreement, and it sounds like they did from the information in your question, then you have performed as required by the contract; therefore, Bank of America is obligated to honor its agreement to forgive the remaining balance of your account.

While the lack of documentation, such as a copy of the check used to pay the settlement, will likely make proving the settlement more difficult, I think that you have sufficient evidence to substantiate the fact that the account was settled. You mention in your question that the representative at Bank of America with whom you have been working could not provide you with information about the date or amount of the last payment Bank of America received on this account. You should request this information in writing from the bank, asking that they send you a statement of your account showing the date and amount of the last payment credited to your account. Assuming that the date and the amount of the last payment on the account match the settlement amount and due date appearing on the settlement offer letter you have, this should be sufficient documentation to show that the account was settled. You will need to forward this documentation to the law firm currently handling your account as proof that the account was previously settled. The law firm should be willing to stop collection activity on the account and report to Bank of America that the account was settled. However, from my experience in working with consumers on similar issues, you will need to keep the pressure on the law firm and follow up regularly until they agree that the account is settled. You should not take no for an answer unless the creditor can provide definitive proof that the settlement terms were not met by you or your settlement agency.

Bank of America should have no problem providing you with the full payment history of your account. But if the bank cannot or will not provide the information regarding the date and amount of your last payment (the settlement payment), you may want to pull a copy of your credit report to check the balance and the date of last payment appearing on your report (also, there is a chance that one of your credit reports will show the account listing as "settled" or "settled in full" as a result of your account being settled). The date of last payment should correspond to the payment due date on the settlement agreement negotiated by your debt settlement firm. It is likely that the creditor simply applied the settlement payment to the account balance, so the current balance on your credit report should roughly equal the balance listed on your settlement letter, less the settlement amount you paid to resolve the account, though the balance may have increased over the past year due to accrued interest. Even if the balance does not exactly match the old balance minus the settlement payment, if the date of last payment corresponds with the settlement due date listed on the agreement letter, you should have enough documentation to present a strong case to the creditor and its attorneys.

In regard to the account number in question being different from your original Bank of America account number, I am not at all surprised by this fact. Bank of America recently purchased the credit card portfolio of MBNA Bank and consolidated the credit card operations of the two companies. When they did this, Bank of America changed many of its old account numbers. This has been a widespread problem for credit counselors and debt resolution firms, as they must cross-check account numbers before making payments for their clients. However, my friends in the debt resolution industry have reported that, by calling Bank of America directly, they have been able to confirm that the old account corresponds to the new account number. If you contact Bank of America and are able to confirm that the new account number represents the same account that you previously settled, you should ask for a written statement from the bank regarding the change of the account number. If the bank representative will only provide verbal confirmation, you may want to record the telephone call, though you will need to disclose the fact that you are recording the call to make sure you are not violating any laws.

Once you have confirmed that the new account number corresponds to the same account that your settlement agency resolved, and obtained documentation regarding the date and amount of the last payment made on the account, you should send all of this information to the law firm handling the account. You should also include a letter explaining the fact that this account was previously settled and that the firm must cease all collection activity and report to Bank of America that the account was settled. You can also send a copy of your letter to Bank of America directly. A good bit of follow up may be required on your part to make the creditor understand that you are not going to give in and pay them more money. In the end, the creditor should be willing to close the account and report a zero balance to the credit bureaus. However, if the creditor refuses to do so, you may want to consult with an attorney in your area to discuss the legal recourse available to you to resolve this account.

I wish you the best of luck in solving your problems with this creditor, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.Bills.com

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Comments (6)


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Bills.com
June 05, 2009
That depends on how the account is showing on your credit report. If it clearly states that the account was transfered to CollectCorp, then they might be the owners of the account, but if it still states that Bank of America owns the account, then definitely insist on a settlement offer letter from them. You are right in being careful as I have heard a lot of instances where a collection agency has worked out a settlement, but it is never reported as paid in full with the credit bureaus.
Munson .
June 05, 2009
CollectCorp has offered a settlement on behalf of Bank of America for $11,000 on a $40,000 debt. I asked for confirmation from Bank of America in writing and CollectCorp said they can not provide it because Bank of America agreed to settlement via email. Is this offer legal and binding? Can another collection agency come after me to collect balance? Shouldn't Bank of America send me confirmation that they agreed to this settlement and I will be released from this debit once term of settlement are fullfilled? Terms are $1981.00 for 6 months. I asked for 12 months repayment, but collectcorp would not agree.
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Bills.com
October 15, 2008
Thanks for your request but Bills.com is not a bank or a financial institution, and we do not lend money directly. Our site is meant to be an information resource for all things related to personal finance. What you need to do is to contact firms that will give you cash for your structured settlements. I do not know of any such companies personally, but if you do your research online, I am sure you will find many.
Paul F.
October 15, 2008
We are settling lawsuit in connection with poor workmanship of developer regarding condominium. Developer has agreed via executed settlement agreement to pay $5,000 per month for 10 months for total of $50,000.... We might agree to sign over the settlement to you in exchange for $30-40K . please let me know your thoughts.
Gregory_b .
January 17, 2008
You basically have to figure out if that debt (which is called a deficiency balance) was included in your bankruptcy discharge. It is LEGAL for them to come after you for what is owed on the loan after they sell the repossessed car, but you need to figure out if they can still collect on the debt or if you paid it off and it was discharged in the bankruptcy. There are two ways to do this: 1. open your bankruptcy file and see if it is listed, or 2. contest the validity of the debt and make them prove that it is valid. A settlement of $2100 on an $8400 debt is pretty good (25%!) if you do owe the debt.
Daron .
January 17, 2008
I had a vehicle repossesed 3 years ago. Since then I filed Chapter 13 shortly after. I was in chapter 13 for 6 mos and was dismissed. I owed $8400 to a finance co for the difference i owed after the sale of the car. 3 yrs later (now) I got a settlement offer from a collection agency handling this for them. The settlement is for $2100. How do I know if this is legal? What if I ignore the settlement? What are the recourses? I hope you can answer some of my questions.
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