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Negotiate American Express Debt

I am negotiating an American Express debt with its collection agent. It insists I provide a hardship letter. Why?

I owe American Express $5,200 and I am over 90 days. They sold my receivable to Nationwide. I spoke with a representative in India and was told that they must get payment by April 30th or my deal of a settlement of $3,100 will be void. What is magical about April 30th? Secondly, they want me to give them my routing number and checking account so they can deduct the amount. I told them I would send a money order as soon as they put the deal in writing. They then said before they put the deal in writing I had to send them a hardship letter and they had to get it approved by American Express... doesn't make sense to me. American Express should be out of the picture. Why do they insist on an online payment?

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Bill's Answer
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Bills.com | Find Learn Save
Highlights

  • American Express settles debts for 50 cents on the dollar.
  • Nationwide Credit Corp. collects delinquent debts on a contingency basis.
  • Call centers may be willing to deal at the end of the month.

You raise three issues in your message, which I discuss below, including:

  • The settlement amount and payment
  • Approval of terms by the original creditor
  • Negotiating tactics

Before I discuss these issues, I need to make it clear that much of my answer is speculation. It probably does not need to be said, but I do not represent American Express or the collection agent.

Settlement Amount and Payment

Each creditor has its own policies for settlement amounts. The rule of thumb for American Express is 50 cents on the dollar. Therefore, the offer of $3,100 for a $5,200 debt is approximately 60 cents on the dollar, which is higher than average but not unreasonable. If you have the funds to make a lump-sum settlement, offer the collection agent $2,080, which is 40 cents on the dollar. The customer service representative may balk at that amount, after which you can offer to meet in the middle at 50 cents on the dollar.

It is unusual for a consumer to receive an offer of settlement at 90 days of delinquency. Typically, settlement offers occur after 120 days of delinquency, when the debt is charged-off.

I caution readers to not give collection agents account numbers and authorization to transfer funds directly from the consumer's account. I have received messages from consumers who have given this information to collection agents, and either through incompetence or malevolence have deducted more from the readers' accounts than the amount agreed upon. That is not to suggest that the collection agent here is unscrupulous, but a wire transfer offers no benefits to the consumer and exposes them to risk unnecessarily. Therefore, the safest course of action is to send the collection agent a paper check.

Approval of Terms

You mentioned the collection agent is "Nationwide." There are several collection agencies with that term in their names. If the collection agent is "Nationwide Credit Corp." then according to its Web site, this collection agent operates on a contingency basis. This means it is paid only if it collects funds from the consumer, and gets nothing if it makes no recovery. I am not privy to its contracts, but it is logical to assume that a collection agent in this type of fee arrangement would require the approval of the original creditor before accepting anything less than the face value of the debt.

It is also logical to assume that if a creditor is willing to accept anything less than the full balance due, that it would want to know that it is forgiving debt to a truly distressed consumer, and not someone who is sitting on a pile of cash and out of miserliness refuses to pay their entire debt.

Negotiating tactics

Review the Bills.com resource Negotiating debt to learn more about tactics and techniques for dealing with collection agents.

You are wise to insist the debt collector put the terms and conditions of the settlement in writing.

Regarding the April 30 deadline, the only reasonable explanation I can fathom for it is that the call center and customer service representative have an incentive or bonus in store if they achieve a certain number or amount of settlements by the end of the month. I can see no legal or business reason for such a deadline.

If you cannot reach an acceptable settlement amount with the collection agent, or if you do not have a lump-sum available to pay a settlement immediately, consider hiring a debt settlement company to do the heavy lifting for you. For a no-cost quote from a pre-screened service provider, visit the Bills.com debt saving center.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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7 Comments

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  • DD
    Jul, 2012
    doug
    New York, NY
    I have an old AMEX card that was closed 3 years ago. I have recently been receiving calls from Nationwide Credit to settle the debt. The company has left messages saying they are from American Express but when I called AMEX they said they had closed the account and sold the debt. I dont trust Nationwide and the same guy with a thick Indian accent keeps saying they are AMEX. I was wondering the best way to proceed. Thanks for your advice
    1 Votes

    • BA
      Jul, 2012
      Bill
      I recommend that you check your credit report to see who is reporting the debt. If Nationwide is not listed on your report and they are not legally the owner of the debt, then it sounds like Nationwide Credit is not following the law. If, after you check your credit report, it appears that you are being harassed by the collector, then I recommend that you file a complaint with the FTC and the CFPB. If you receive a letter from Nationwide Credit, then validate the debt and send them a cease and desist letter.
      0 Votes

  • DH
    May, 2010
    Debt
    Debt Help This is a wonderful opinion. The things mentioned are unanimous and needs to be appreciated by everyone.
    1 Votes

  • BA
    Apr, 2010
    Bill
    Thank you for your kind words. We hope that we helped you and others solve difficult money problems. Bills.com
    0 Votes

    • MY
      Mar, 2012
      Mark
      Ketchum, ID
      We've been involved in a short sale in Idaho for 8 months. Last fall the owner went bankrupt before the short sale went through. There is an Amex lien on the property for $25K. In Dec. 2010 a court ruled for Amex for the full amount. Astonishingly, the lien is still there and he still owns the house. Equator just approved our counter offer but no one can remove the Amex lien. The title won't be cleared until someone does. The realtor is trying to find someone to negotiate with at Amex. What are the chances they will settle for a lesser amount? Thanks
      0 Votes

    • BA
      Mar, 2012
      Bill
      The owner needs to consult with his or her bankruptcy lawyer to learn why the lien was not discharged in the bankruptcy. This could be the result of a clerical error. It is possible, for example, the bankruptcy court did not notify the local county clerk that it should remove the lien.

      If you do not want to pay the lien, then move on. Depending on where you live, you may find many other short sales and REOs to choose from. Alternatively, if the house is a bargain, negotiate a settlement on the lien yourself.
      0 Votes

  • 35x35
    Apr, 2010
    Walter
    this article and review you did on American Express debts and collections is incredible. I can't believe that you do this amount of research and work for free. thank you bills.com
    0 Votes

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