Settling the Debt for Less than Total Value
As previously mentioned on the FDCPA blog, times are tough for both consumers and Collection Agencies. Often times Collection Agencies will offer consumers a significantly reduced “settlement” amount, if they are able to remit payment immediately. This can either be an opportunity for the consumer to satisfy his/her obligation for a reduced amount, or an underhanded ploy used by unethical collectors to get a person to pay.
In order to protect oneself from the latter, ALWAYS obtain the proposed settlement offer in writing from the Collection Agency. Keep detailed records of your transaction with the Collection Agency. If everything was done on the up and up, then congratulations, your delinquent debt has been settled.
However, making a payment that you were led to believe was a payment in full does not always end your trials and tribulations with the Collection Agency.
There are two potential issues that could arise.
The first is that the same collection agency could continue to collect on what would have been the remaining balance of the debt. We have heard stories of Collection Agencies offering a “Settlement Payment for 50% of the balance.” After receiving the payment, the collection agency then tries to collect the other 50%, claiming that the settlement payment made by the consumer was for only half the debt.
If this occurs, then this collection agency has violated the FDCPA by making misrepresentations in an effort to collect a debt.
The second problem that we have witnessed arises when the Collection Agency offers a settlement for less than the entire debt but is not the owner of the debt and is not authorized by the holder of the debt to eliminate the remainder of the debt not covered by the “settlement” payment. After making a payment which the consumer was led to believe was a payment in full, the Collection Agency takes their commission and returns the remainder of the balance to the original creditor; often to have it passed to another Collection Agency, starting the process again. Again, if this occurs, the first Collection Agency has violated the FDCPA through its misrepresentation.
If you feel that you have been misled into accepting a “settlement” payment by a collection agency, please complete our case review questionnaire at www.fairdebthelpers.com.
Not all Collection Agencies engage in these unfair and misleading practices, and often consumers are able to settle their obligations for less than the total balance owed. This is a good way to see yourself out of a difficult situation. Whenever dealing with Collection Agencies Caveat Emptor, buyer beware.
Matthew S.
