Disputing Bad Credit From Original Creditors

I love disputing bad credit with collectors and original creditors alike.  Collection companies are easier to force to go away, and sometimes, original creditors can really get you frustrated.  Its not that 3rd party collectors don't get you frustrated as well, its just a bit easier because you know for a fact you've never entered into a contract with them and just about everything they do is a violation of law.  Its fairly easy to prove that you have no liability to them and force them to go pound sand.  But original creditors are a little bit different.

First of all, if you have bad credit from an original creditor, most likely you at one time or another signed a contract (ie. application) to get credit from them. I say most likely, because there are times when they actually have the wrong person and your credit takes a hit through no fault of your own.  But, this is not about identity theft or incompetent mistakes by original creditors. I want to talk about an actual account that you have from an original creditor that is bad and you need it gone.  

The first thing to realize, is that whether you think you may owe the bad debt or not, the truth is, you don't.  You may have signed a contract with them, but was it a "valid" contract?  The law says NO! At least for most.  In order for a contract to be valid, it needs at least 4 essential elements.  They are:

1. Offer.  It must have a clear stated offer.  One party will do something and the other party will do something.  (They will lend you a certain amount of money for you to use, and you will pay for what you use.)  The offer must have a deadline for how long the offer is good for before it is withdrawn. The offer has to have real numbers (if it has to do with money), not estimates or ballpark figures. The amount that is being lent, the interest, the minimum payment that has to be paid at a certain regular time. The offer will completely define who is loaning whom the money and all the terms to the offer so you know what you're getting into and whom you will owe, and for how long.
2. Acceptance.  If you can live with the offer and you're content with it, you accept it. If you don't accept their terms, then you don't have an acceptance.  Many times in real estate a seller "offers" their house for sale at a certain price, certain terms (what may or may not be included), etc. A prospective buyer looks at that seller's offer and says, "I like the house but I don't like all the terms the seller wants."  So, he makes a "counter-offer."  When they finally agree, there has been an "offer" or "counter-offer" and "acceptance."
3. Consideration.  Consideration is generally monetary, but at least something of value is given or a promise of valuable service is offered with a promise of performance for that thing of value. A creditor offers to lend money and will receive the money back plus interest.  The person receiving the money will give something back of value to show the acceptance is genuine. Sometimes its a fee for accepting a card. In all actuality, the SIGNATURE on the application is the thing of value that is the "consideration", though the creditors do NOT disclose that fully.
4. Meeting of the minds.  This means that each party fully understands EVERYTHING about the contract. This is one of the biggest things that FAILS in a credit card or loan contract.  There is not full disclosure, which means there is a violation of REGULATION Z. There is a violation of the Truth in Lending Act (TILA).  Because of these failures to fully disclose and to have an actual legal meeting of the minds, there is NO VALID CONTRACT. The contract is not voidable, no, it is actually VOID! Null and void. Does not exist.

There are actually a couple other things to a valid contract. One is "capacity", which basically means, does one have the capacity to enter into a contract?  Are they of legal age and sound mind or underage or incompetent.  Without "capacity," there is no contract.  The other one is "legality."  Is the contract for something legal? Is it a contract to perform a legal service or for something that is illegal under the law, so there is no legal way to enforce it? 

So, when disputing with original creditors, you want them to prove that they actually had a valid contract. You want to know if they violated TILA (Regulation Z).  I can answer that for you.  Yes, they did.  They didn't tell you that the "consideration" was YOUR SIGNATURE that they monetized.  It was the collateral.  So, you basically funded your own loan or credit.  They don't tell you that.

They don't tell you that they actually lent credit, not money. They don't want you to know that it is illegal for a bank to 'LEND CREDIT'.  But they do lend credit, and its illegal, and it makes a contract not a legal contract, which makes it void.  So, when disputing, demand from them that they prove to you they lent their MONEY to you and didn't just lend credit and call it money.

Now, when they respond to you saying they investigated your account and everything checks out and they claim that their records are accurate, its your job to hold their feet to the fire.  Respond back to them. Tell them that you received their response and you appreciate that they investigated, but they failed to validate.  You want a copy of the contract with your signature and their employee's signature. You want a full accounting. Every expenditure, every payment, every bit of interest applied, fees, plus the dates every event occurred.  Then, also demand that they source the funds they supposedly lent or did they lend you credit?  You want them to say that they lent you credit, because then they violated federal laws that have been upheld by the US Supreme Court.  It also incriminates them for trying to enforce a contract that is not legal, not valid, is null and void.

Original creditors have to comply with the the Fair Credit Billing Act (FCBA) and there are many states that also enforce the Fair Debt Collection Practices Act (FDCPA), their own version that mirrors the federal law.  These laws are ammunition that helps you remove bad credit from your credit reports.  They are there for you to use.  Stop thinking you legally "OWE" these fraudulent debts. Stop believing that they have to be reported for 7 years. That's an outright lie.  Nothing has to ever be on your credit report. The law actually says that bad credit may NOT stay on longer than 7 years.  That's the truth.  Its your job to challenge them and throw the law at them and make them remove it. Without a challenge, they will not remove anything that can and should be gone. 

If you don't feel like its a job you want to attempt, feel free to email me or call me at the contact info above.  I would love to help you have a credit report you can be proud of and a FICO score that will help you get the loans and credit you desire. 

Top 8 Complaints and Violations of 3rd Party Collectors

Every year the FTC publishes an annual report of complaints they have received from consumers about 3rd party collectors. The FTC oversees FDCPA, FCRA, FCBA, FACTA and State Statutes compliance. Here are the top complaints. It doesn't necessarily mean that they are the top violations, exactly, it means the ones that have annoyed consumers enough to complain to them about. These facts are from the 2008 annual report.

1. DEMANDING A LARGER PAYMENT THAN IS PERMITTED BY LAW : The FDCPA does not allow debt collectors to misrepresent the character, amount, or legal status of a debt. They cannot tack on extra fees for collecting, report the wrong type of debt or claim to be lawyers when they are not, not state the original creditor, calling it one type of debt when it is another, like saying it is a revolving when it is an installment, or calling it a factoring account when it is not. They are not allowed to collect any amount that is not expressly authorized by the original contract that created the debt or that is unlawful.
   
2. HARASSMENT: Debt collectors are not allowed to harass you by calling outside of inconvenient times, repeatedly calling you or your work or someone who may know you. They may not use profane or abusive language, they may not threaten you with harm or the use of violence. Amazing that such behavior has to have laws created against it, isn't it?
   
3. USE OF THREATS: They are not allowed to threaten certain actions will be taken against you if you don't pay. This includes saying they are going to sue you, when they are not, saying they are going to garnish your wages, repo your property, ruin your credit, throw you in jail or make you lose your job. One thing I've learned over the years, is that the more they threaten you, the more desperate they become, they are exposing that they have no legal standing to collect from you if you claim and use your rights against them.
4. IMPERMISSIBLE CALLS AT A PLACE OF EMPLOYMENT: They are allowed to call you at your work. However, if they are told they may not call there, then they legally are required to knock it off. I would like to take this a bit further and say that the law says they can't make that phone call to your work if they have reasonable knowledge that they should not. My thinking on this is that if they have tried to collect from someone else at that workplace, and have been told already not to call at that location, then they should have reasonable knowledge that they should not call you either.
5. REVEALING ALLEGED DEBT TO THIRD PARTIES: The only reason they are allowed to contact someone other than you about your alleged debt is to get your location information. They are not allowed to contact them unless they have reason to believe that the 3rd party knows your location. But, they are not allowed to reveal that they are attempting to collect an alleged debt. Once the 3rd party tells them they don't have any information to give them, they are supposed to never call them or contact them again. They do this to embarrass and intimidate you and it is a violation. They also have many complaints against them for harassing and threatening 3rd parties, another violation that falls in this category and the harassment category. Third party contacts include employers, relatives, children, neighbors, and friends.
   
6. FAILING TO SEND REQUIRED CONSUMER NOTICE: When collectors get a hold of an account they allege is yours, they are required by law to notify you in writing the amount of the debt, the name of the creditor to whom the debt is owed, and a statement that, if within thirty days of receiving the notice the consumer disputes the debt in writing, the collector will obtain verification of the debt and mail it to the consumer. The reason they don't always do this is because they don't want you disputing something that they can't verify or validate.
7. FAILING TO VERIFY DISPUTED DEBTS: This one I believe, is under reported. They are not allowed to resume collection activity until after they verify your dispute. This includes sending back a letter saying, "yep, you owe us, here's the amount, now pay up". That is not verification. That is not validation. What it is, is a violation! They just keep collecting because they can't provide the actual validation that proves you legally owe the alleged debt. What they commonly do, is ignore your dispute and sell the account to another collector, sometimes a sister company of theirs, and then keep attempting to collect.
8. CONTINUING TO CONTACT CONSUMER AFTER RECEIVING “CEASE COMMUNICATION ” NOTICE : If you in writing, tell them to stop contacting you, by law, they must. But, they like to claim they never got the notice. This is why your communication needs to be in writing to them and sent certified, return receipt. That way, you have a copy of the notice to them and the proof that they received it, should you have to go to court against them.
   

So, now that you know many of the common violations that collectors commit, what is your plan of action? Here's what it should be. Dispute, document consistently all communications, keep an accounting of the responses, keep all your proofs of service and copies of letters you send or receive and a phone log of every phone call you or someone else received, along with the company name, employee's name, date and time, if possible. Each violation, and since they usually violate in several ways at one time, because they violate the FCRA and FDCPA many times at the same time, can add up to big bucks for you. They are usually worth $1000 each. You need to document consistently and accurately. That way, it can be a huge bargaining tool for you or great supporting evidence if you end up suing them or counter suing them in a court of law! Repairing your credit can give you a nice fico and good credit report, and make you money at the same time! Sweet!

Should You Pay Off Those Collection Accounts?

So you've decided that this is the year to work on rebuilding your credit. You get a copy of your credit report and there are some collections on it. Or maybe you keep getting calls or letters from collectors - or both, and think that you should finally try to take care of some of them.

Stop! If you're thinking about paying them off, wait just a minute here! If you think it's going to improve your credit, think again. Always remember this. Once a negative, always a negative, when it comes to your credit report. Just because it's paid, does not mean they are going to move it into the positive accounts section. It's still a collection account, which is negative, it is just paid.

So, here are the facts for you to ponder. A collector bought your account. Basically, he paid off your debt for you, voluntarily I may add. If you asked a friend to make a payment on an account for you, does that make him or her a party to the original contract? No! They are voluntarily making a payment for you. You might make a little contract between you and your friend to pay back the money they used to make the payment, but, they are not part of the contract between you and the original creditor. That's a different agreement between the two of you.

It is the same with the collector. You did not enter into a contract with them to pay for this account, they did it on their own and now are trying to make you think that you have some obligation to them. You don't! Unless you signed another contract with them agreeing to pay them, they just took a chance, they gambled that they could coerce you into making them richer.

The best thing to do before giving any collector money, wait let me rephrase that. The best thing to do INSTEAD of giving any collector money, is to demand validation. The law says they have to prove you owe them money. You don't and they can't - prove it, that is. Dispute the debt with the collector. Do not accept a printout of a bill or charges as being validation. That is not validation, it is a bill. It is collection activity AFTER validation of the debt is requested. It is a violation of law.

The law says that when you dispute a debt with a collector, they must cease all collection activity until the debt is validated. Just about anything they do that does not validate is actually considered collection activity and is a violation of law. Keep track of every thing they do. Every letter, every phone call, every update made on your credit report. Every violation they make is worth money to you. Most violations are worth $1000 payable to you. That's a thousand bucks. They start adding up fast, to where they might actually owe you more than any credit line that was originally issued to you!

So here is what you do. Send them a letter, certified, return receipt. (CMRR). You will get a green card back in the mail as your receipt that they received it. The letter should tell them you are not avoiding paying, but you are not going to pay for something that you do not owe, and not to someone you don't owe it to. You are going to request from them several things that are very important.

First, request a copy of the original, wet ink signed, authentic, contract. Now, request that they supply you with the actual accounting of the debt. I mean, where did the money come from that created the credit issued to you? Where did the bank get the money they supposedly loaned to you, or the credit that they issued to you?

You see, the law says that banks cannot lend their own money. It also says they cannot lend their own credit. It also says they must have reserves that are a fraction of what they lend. Those are their member's deposits that are the reserves. So, they are not lending the member's reserves, not their own money, not their own credit. So, where did they get the money to lend you?

They created it out of thin air, basically. Actually, they monetized your signature on the contract and created a ledger for the account. Then they put an amount on the ledger of the value of your signature that they "approved". So, really, you supplied the "money" or "credit" with your signature. Then, they put another entry on the books. This one says that they gave that money to you and now you have to start paying it back. But, why would you pay them back money when they didn't give you the money? Your signature supplied the funds for the money or credit that you received.

Sounds confusing doesn't it? It's supposed to. They don't want you to know or understand it.

Here's another thing about credit. The contract you signed is void because in order for a contract to be legal and binding, all parties have to be at risk. But, who is actually at risk? Only you! It is a unilaterally risked contract and void. Since they really didn't put any money into it, they didn't risk anything. They assign an interest rate for the money that you loaned yourself. That is their profit. But actually, the whole amount and the interest is profit for them. Again, this is because they did not come out of pocket to issue the loan or credit. Your signature did!

Now here's a little more. When you default on this contract, they charge you more and more and more. Then the law says that after 6 months, they must charge off the account. So they do. That puts your balance at $0. All "monies" in the bank are insured. So now we're going to see them commit insurance fraud. They get paid off from the insurance the amount insured. They take a credit to their taxes for a loss - which I must remind you is not an actual loss, but a loss on what they wanted to fraudulently make. Then, here it comes.... they sell the account to a third party collector! Bang! They just made more money on an account they got a tax credit for, for an account they were paid in full by the insurance company, and now the collection company.

Daaanng! Not too bad of a trick for that original creditor, now was it? So, don't feel sorry for them that you can't "pay back" for this credit or money you were "given". The original creditor is out the cost of "managing the books", and from projected future earnings. The collector will be out the money they gambled on forcing you to pay back something you don't really owe, and the insurance company will write off the amount on their taxes.

What did it cost you? Well, hard earned money that you paid them, negative marks on your credit report, stress from worrying how you are going to pay and the harassment you have received from the pain in the butt phone calls and letters they sent you.

Dispute, dispute, dispute. And while you're at it, let them know that you know they didn't front the money, so they can just pay back all the money you sent them in error while not realizing that your signature funded the deal! Don't forget to dispute with the credit bureaus after getting the green card back for the letter you sent to the collector. That will help remove it from your credit report.

Are you feeling better about not paying them now? I hope so. Better to just dispute and get it off your credit and out of your life. Get a great credit report again, get some more credit cards, use them, take cash advances, and wash, rinse repeat! Your signature created the credit, it's your money, enjoy! You're not the one committing the fraud and creating faulty contracts that are void and unenforceable, they are. Who cares what your intention is with your new found knowledge? Play the game, but play it to your advantage!