Settling with credit card companies for less than 20%

[Zac]

Discover offered to settle for 50% and Citibank 40%.  These offers were made within a couple weeks of the chargeoff dates, but I think they will go lower.  Discover also has an interesting payment program where they will waive all fees and usurious (29%) interest accrued since the account became delinquent and allow the remaining balance to be paid off over 5 years at 1% interest.

[de jure]

You said:

Wow!  How did you get them to agree to such a low percentage?  What was the original balance when your client stopped paying (before all the fees, late charges, and default interest rate)?  How long had your client stopped making payments before they agreed to settle?  Thanks.
[/quote]

It really was a unique situation. I don't want to get into the details of my client's issues, but she had no way to pay this $15K. I think the original balance started at about $5K, so 10K  of it was late fees and compounded interest at some insane percentage. They filed suit about one minute ahead of the statute of limitations. Here is what I think: I bet they couldn't come up with admissible evidence of the agreement. After nearly six years, the debt had been assigned to various collectors, and may have been collateralized for all I know. The collector was a known bottom feeder and I offered a settlement in one lump, not payments. The collector's attorney had gotten his law license about ten minutes before signing that complaint, and that didn't hurt either.

Never, ever get in someone's way when they are making a mistake is my motto. Elizabeth

[DoomandGloom]

I got my credit card companies to settle for zero...

[mousewizard]

I had an interesting experience with one of the majors the other day. They had bumped me up to 29% because I was a couple of days over 30 on a payment. The original rate they had been charging me was 21% anyway; their excuse for the original rate was my credit score went down, so my interest should naturally go up.

Anyhow, I called them and asked to have the 29% rate stopped and the account person readily agreed to drop it back to 21%. I explained that all my others cards were below 14% and all the way down to 8% and could they do better. He checked and came back and said no. I said OK; how about this: I pay the balance in full and you guys don't get any more interest money out of me?

He went away for a while longer and came back with 13%. I was blown away.

This is significantly different behavior on the part of a bank. They're finally admitting that they want you paying interest, and that high balances are a desired customer attribute.

This incident may also speak to the information they're tracking. You see, a couple of years ago I had a card that changed its due date and I didn't catch it, so I went into default and they were charging me 29% on a significantly high balance. I called and said I wouldn't put up with this and they should drop the rate. This account manager had an attitude of "what are you going to do about it" and I told her I would simply transfer the balance to a different card, leaving them with a zero balance. They said fine and I did. Never call my bluff; I don't bluff.

If they're now tracking this kind of pay-off behavior, that would explain the results I got with this last negotiation.

[Zac]

I had an interesting experience with one of the majors the other day. They had bumped me up to 29% because I was a couple of days over 30 on a payment. The original rate they had been charging me was 21% anyway; their excuse for the original rate was my credit score went down, so my interest should naturally go up.

Anyhow, I called them and asked to have the 29% rate stopped and the account person readily agreed to drop it back to 21%. I explained that all my others cards were below 14% and all the way down to 8% and could they do better. He checked and came back and said no. I said OK; how about this: I pay the balance in full and you guys don't get any more interest money out of me?

He went away for a while longer and came back with 13%. I was blown away.

This is significantly different behavior on the part of a bank. They're finally admitting that they want you paying interest, and that high balances are a desired customer attribute.

This incident may also speak to the information they're tracking. You see, a couple of years ago I had a card that changed its due date and I didn't catch it, so I went into default and they were charging me 29% on a significantly high balance. I called and said I wouldn't put up with this and they should drop the rate. This account manager had an attitude of "what are you going to do about it" and I told her I would simply transfer the balance to a different card, leaving them with a zero balance. They said fine and I did. Never call my bluff; I don't bluff.

If they're now tracking this kind of pay-off behavior, that would explain the results I got with this last negotiation.

It's unlikely they're tracking balance transfers or that they reduced your rate as a result of the balance transfer.  Also, credit reports only provide account balances going back 2 years. 

Credit card companies are increasingly concerned about keeping customers paying.  As it is, their chargeoff rates have been rising steadily.  It would be a nightmare for them if people just decided to just stop making payments.  And 13% while much better than 29% is still quite high given the 0% fed discount rate. 

Many banks, most notably Bank of America, are proactively dealing with these problems by lowering rates/removing fees and settling seriously past due (150+ days) accounts for a small fraction (20-25%) of the balance as they can see what's coming.  Other banks, perhaps most notably capital one and wells fargo, are behind the curve. 

[Zac]

Citibank is offering 25% settlements on their past due credit card accounts.  But, if you have multiple credit card accounts with them, they may send the accounts to different collection agencies.  Only Citibank accounts handled by UCB seem to be eligible for  the 25% settlement at this time.

Discover may be agreeable to settling for 50% and they have some interesting financial hardship program including this one:

Discover will refund all late/overlimit fees and finance charges since the account was past due and will agree to a 5 year payment plan (~1.6% per month) with 0.99% APR. 

[risquebznss]

sheesh, I pay CC off monthly, have a small mortgage.  I think I should run up CC and leverage up home then go idle and negotiate!    Don't need much credit for the next several years.    Seems that the responsible people get screwed.

[BlackSheep_ProvenRight]

I defaulted on all my credit cards in 2002.  They were sold to junk debt buyers who all sued me last year through this year.  I beat them all in court and paid a big fat 0 to those bastards!

[golddust]

I defaulted on all my credit cards in 2002.  They were sold to junk debt buyers who all sued me last year through this year.  I beat them all in court and paid a big fat 0 to those bastards!

And how did you do that? Just asked for proof it's really yours or what? I know after they've changed debt collectors a few times they tend to lose track of the paperwork proving you owe the debt at all. Sloppy records on behalf of the debt collector is a debtors best friend.

[BlackSheep_ProvenRight]

Essentially yes.  The debts had been sold a couple of times and ultimately they couldn't produce the documentation.   That is a little over simplified on one of the cases as they had almost everything but in the end I beat their ass even when an attorney I know said they had me      Still not a fun process to go through and it took a lot of research and effort to beat them.     However considering the original debt on one was about 4k and they were suing me for 15k I was determined to fight to the bitter end.    Not to mention it all started because a big corporation went bankrupt and stiffed me out of a lot of money (I ran my own small business) and I just couldn't let myself get screwed twice!

The sad thing is 95% of people don't fight these junk debt buyers..if everyone just fought them they would go out of business.    I was amazed everytime I went to court and default judgment after default judgment was issued all because people just failed to show up.

[Zac]

One suggestion if the collection agencies sue: file an answer within the required 20-30 days (depending on your local court rules) denying their claims and also file a counter-suit!  (sue them back for violations of FDCRA, breach of contract, fraud, etc. as appropriate to your situation)

Also, on accounts that you don't plan to or can't settle, send a dispute letter in response to every collection letter you receive.  It can be just be a simple "I dispute the validity of this debt." with a copy of their collection notice attached and sent by regular mail (of course, keep a copy of your letter).  If you want to go to the expense, you can send it certified, but don't know if it would make any difference in the end. 

As an alternative to settling for a fraction of the balance, Citibank is offering a 5 year 0% interest payment plan and will also refund all fees and interest accrued since the account went past due.  If they had offered this option before the accounts went past due, we might all have been able to avoid all this fallout. 

[golddust]

One suggestion if the collection agencies sue: file an answer within the required 20-30 days (depending on your local court rules) denying their claims and also file a counter-suit!  (sue them back for violations of FDCRA, breach of contract, fraud, etc. as appropriate to your situation)

I believe it's called a motion for discovery if you deny their claim.

Also, on accounts that you don't plan to or can't settle, send a dispute letter in response to every collection letter you receive.  It can be just be a simple "I dispute the validity of this debt." with a copy of their collection notice attached and sent by regular mail (of course, keep a copy of your letter).  If you want to go to the expense, you can send it certified, but don't know if it would make any difference in the end. 

I wondered if instead it would be better to just let it change collection agencies a few times before you start disputing. That way, it gives them more time to lose their paperwork. You can send what's called a Debt Validation and you're requiring them to show proof you owe the debt and strike it from the record if they can't prove it -- some junk debt buyers will occasionally immediately file suit after one of these -- I don't know if it's because they really have proof and now want to nail you or they don't have squat and want to hurry up and see if they can get a default judgment before you get too wise. I don't yet have personal experience with it.

[BlackSheep_ProvenRight]

I agree, each time the debt is sold makes it more likely the papertrail gets lost.  Worked for me

The initial response is just a denial.  Discovery is the interrogatories and that is when you ask them for proof.

[golddust]

I agree, each time the debt is sold makes it more likely the papertrail gets lost.  Worked for me

The initial response is just a denial.  Discovery is the interrogatories and that is when you ask them for proof.

Right!

[Diogenes]

This is not a credit card issue, but it's related. I had to sign for my daughter's cell phone because she was underage at the time (14). We got her the phone because she's a type 1 diabetic ( since 11) and we wanted her to be able to call us in an emergency at school or where ever she was.

The 3 year contract was through Rogers and it appeared to be a very good deal, but soon we were being charged with calls that were never made, calls made out of the country, billed for services that were not used etc. What was supposed to be a $35.00 a month charge was never less than $50.00. I called them numerous times and couldn't get any satisfaction, so I told them I didn't want the phone , it was being turned off and I wasn't going to pay any more bills. They then told me they couldn't cancel my account until it was paid in full and that I would have to pay a $400.00 early cancellation fee, two years into a three year plan, so I said "fine, I'm not paying another cent".


They kept calling for three months and I kept telling them "No, the phone is off , the battery is out, I'm not paying until you remove all the bogus charges. At the end of the third month I get a call saying, "look, we'll knock of 25% of the bill and give you
our cheapest new plan for the balance of your contract". I agreed and paid up the next week and popped the battery back in and turned on the phone,......nothing, dead, no signal. So I call Rogers and said " Mr such and such offered me a discount, new plan etc, I've paid up and now the phone won't connect", "Well sir" she said, your contract has been canceled, you are no longer our customer". "What about that cancellation fee of $400.00" I said, she replied "your accounts closed, your balance is zero, have a nice day".................Something must be up, I've never heard of any of the cell phone companies doing this.