Merchant turned my account over to collections after I reversed charges on a faulty product

April 21, 2016 14:20 by Consumer Ed

Dear Consumer Ed:  

I purchased a product that was faulty and disputed the charge with my credit card company. I had the charge successfully removed from my account. Now the merchant has turned the matter over to a collection agency. Can they do that?

Consumer Ed says:  

Generally, once the credit card company has reversed the charge, it’s between the credit card company and the merchant to determine whether the charge was valid.  Since the credit card company did remove the charge, the merchant likely lost that fight. 

If the merchant has turned the account over to a collection agency, you should strongly consider disputing the charge with the collector. You must do so, in writing, within 30 days of receiving notice of the debt from the collection agency.  You should verify that the letter from the collection agency informs you that you have 30 days to dispute the charge.  If the letter does not inform you of this right, the letter itself may violate the Fair Debt Collection Practices Act and, as a result, the debt may also be uncollectable for that reason.  If you dispute the charge, the collection agency must ask the merchant for proof of the debt.  The merchant has 30 days to produce this evidence. During these 30 days, the collection agency cannot proceed to collect the alleged debt from you if you have informed the agency that you are disputing the charge.


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Debt consolidation

January 13, 2016 20:52 by Consumer Ed

Dear Consumer Ed: 

What is the right approach for debt consolidation? Is it a good thing to do? How do I find a reputable company? 

Consumer Ed says:  

Whether debt consolidation is right for you, and which approach you should take, depends on a number of factors.  Debt consolidation involves transferring multiple loans into a single loan – your various debts, whether they are credit card bills or loan payments, are rolled into one monthly payment.  Someone who qualifies for consolidation may receive:

  • Lower interest rates — Extending the principal balance over a longer period of time allows a lender assuming multiple loans to reduce interest rates on the larger loan while still collecting an adequate amount toward the principal owed. 
  • Lower monthly payments — By consolidating high interest debts into one lower interest rate, you will owe less each month. 
  • An improved credit score — If your credit score has suffered because of longstanding debt, your ability to make monthly payments over a long period of time can help raise it over time. 

Unfortunately, there are many companies that take advantage of people trying to solve their debt problems by charging them excessive fees, not paying creditors in a timely manner, and actually worsening debt problems.  So take care in choosing a debt adjustment company.  To locate a reputable company in your area, contact the National Foundation for Credit Counseling at 800-388-2227 or www.nfcc.org.  

 

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What is the maximum interest and fees a buyer of old credit card debt can charge?

October 13, 2015 19:47 by Consumer Ed

Dear Consumer Ed:  

I have some outstanding credit card debt from seven years ago. I was recently contacted by a debt collector, who is not the actual creditor, attempting to collect this debt. They want me to pay fees and interest that have nothing to do with the original debt. Can you tell me what is the maximum percentage of interest and collection charges that a buyer of old credit card debt can charge the debtor in the state of Georgia? 

Consumer Ed says:  

It’s critical that you consult the original credit card agreement to see what (if any) additional fees, interest or other expenses would be collectible.  If the original agreement (or the agreement between the originator and a collector) permits such costs, a debtor may be required to pay reasonable costs associated with collecting the debt, such as court costs and credit report fees; however, debtors are entitled to an explanation from the debt collector as to what is being charged and why.  If you’re the debtor, you should make a written request to the debt collector to provide such an explanation in writing; the collector is obligated to comply. 

If the credit card agreement does not say anything concerning collection costs and interest rates, Georgia law allows pre-judgment interest to be collected at a rate of seven percent.  Post-judgment interest can be collected at “a rate equal to the prime rate as published by the Board of Governors of the Federal Reserve System, as published in Statistical Release H. 15 or any publication that may supersede it, on the day the judgment is entered, plus 3 percent.”  

It’s also important that you understand the limits on what’s known as “old debt” (i.e., time-barred debt).  In Georgia, the statute of limitations on credit card debt is six years. After six years of no payments, the debt is considered time-barred.  Keep in mind that debt being time-barred doesn’t mean it can’t be collected, only that the debtor can’t be sued on it.  

Purchasers of debt that is “old” (i.e., time-barred or already in default) can be considered “debt collectors” who fall under the purview of the Fair Debt Collection Practices Act (“FDCPA”).  The FDCPA prohibits debt collectors from using any unfair or unconscionable means to collect or attempt to collect any debt. That includes the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt, or permitted by law.  

If you are certain the statute of limitations has expired, you can use that fact as justification that you do not have to pay the debt. But, be careful not to restart the statute of limitations. You can take many actions with an account, perhaps even inadvertently, that will trigger a restart of the statute of limitations. For example, making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account are all actions that can restart the statute of limitations on an account. And, when the clock restarts, it restarts at zero, no matter how much time had elapsed before the triggering activity.

Also note that old debt is not a credit card balance that you may have racked up years ago but are still making minimum monthly payments on. In this case, you will not be considered to have defaulted on the debt.

In addition, be aware that some debt collectors knowingly file lawsuits to collect on expired debts. Many people who are sued on a debt they know is very old simply don’t answer the lawsuit, because they believe the statute of limitations has run. THIS IS A BIG MISTAKE. The statute of limitations is an affirmative defense that must be pled in answer to such a suit. Therefore, if you are sued and do not answer the lawsuit, the debt collector will be able to get a judgment by default against you – even though, had you gone into court and asserted that the debt was time-barred, the case would have been thrown out! If you are sued on any debt, never ignore the lawsuit.

If you have further questions about this subject, you should visit the Federal Trade Commission’s website at www.consumer.ftc.gov/articles/0149-debt-collection, and the website of the Georgia Department of Law - Consumer Protection Unit at www.consumer.ga.gov/consumer-topics/debt-collectors


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