Pennies on the Dollar: what is the market value of a charged off debt?

[Anonymous]

My church occasionally gives its poor members financial help.

One member had a car reposessed in spring 2009, Toyota has charged off the debt (about $7,000), and a credit agency is attempting to collect it.

How much did the agency pay for this debt?

How much are they likely to settle for?

We are happy for the agency to make it's profit, but we see no reason to use our charity dollars to pay off the full value of the debt.

We'd appreciate any guidance on how to conduct this negotiation.  Thanks in advance.

[llecs]

Welcome to the forums!

Who owns the debt? Toyota (TMCC) can charge-off the debt, but may still own it too. It's possible they assigned a CA, vs. selling the debt. You may want to check on that first. A tell-tale sign that they own it is if TMCC still reports a balance. If the balance is $0, then, yes, they probably sold it to that CA.

If the CA did buy the debt, there's no telling how much they bought it for.

Likely they won't be open to settling the debt if the debt is still inside your state's SOL. If inside SOL, the CA can still sue for 100% and collect. There's no incentive for them to settle if they can get all.

Again, start by figuring out debt ownership. Be prepared to pay 100%. Sending any letter to the creditor now, if inside SOL,  can get the debtor sued in a hurry. Then you'd be doing more harm than good. If you have 100% saved, and TMCC owns the debt, then start by offering 70% and see what happens. Get it in writing and if you really want to help the debtor, get it via a PFD agreement. If the CA is assigned and collecting for TMCC, ignore the CA and deal directly with TMCC. Again, do everything via mail. Don't make any verbal agreements. If the CA owns the debt, ignore TMCC and send a DV letter to the CA verifying that they can even collect on this debt. If they verify, then offer a PFD agreement via 70% or so. The % offered is always a personal call. IMO, offer 100%. I've been burned in the past by settlement agreements.

[Anonymous]

Thank you for the welcome and for the help.  I mistyped, the vehicle was repossessed in 2007.

Who owns the debt?   The Transunion (TU) credit report shows the Pay Status as "Charged Off as Bad Debt," with a Balance of $0.00 and a Past Due of $0.00.

Our member sent a Debt Validation letter I picked off the internet with a laundry list of requested documentation among which was the "identity of the current creditor."  The prompt response (16 days) from the Collection Agency (CA) included a notation of "Reference Creditor" and "Our Client" as Toyota Motor Finance Corp, but no clear statement of who currently owned the debt. The "account was placed with our collection agency" in March of 2009.

A second letter to the CA requesting (among other things) "the identity of the current creditor" has gone unanswered after 26 days.

The member's TU report is otherwise relatively clear, with a couple of credit cards and a retail store, all with $0.00-balance, but a consistent late payment history.  However, he's several months late on payments on another car.  He's a student from a government-assistance family.  He has absolutely no assets and $16K in student loans.

Even if the CA sues, I think that their only chance of recovery is by accepting an offer from the church.  Is that what they are going to think?

Should I force them to make the first offer, rather than initiating the bargaining with 70% or 100%?

The member has stopped the phone calls by requesting all communication be in writing.

[llecs]

Sounds like the CA owns the debt. Good move to DV them. Per the FDCPA, the CA doesn't have to provide all of that stuff. They do have to list the OC (Toyota) and they do have to list the balance owed. Legally, they don't have to answer the second letter.

Keep up with the comminucation and keep everything in writing. Never ever never talk to a CA. Their word is never their bond.

The CA likely would press for 100%. Certainly wouldn't hurt to try to get them to throw out an offer first. BTW, you and the member would have to come to an agreement to decide on payment. If the CA doesn't accept a PFD, maybe they'll accept a lower % offer. Or maybe the CA would accept a PFD, but at a higher percentage.

Another thing worth doing is to search in here for the CA's name to see if others have dealt with the same CA. You'd want to look for collection tactics, risk of lawsuit, to see if they have accepted settlements in the past, and to see if they'll accept a PFD. Some are relatively easy to work with and others won't budge, even for 100%. And yet others are sooo nasty, that they'll sue no matter what.

[Anonymous]

llecs, thank you so much for your responses.

I've searched this site for the CA's name and found nothing.  A google search turns up a recent law suit they lost about the wording of their telephone messages, their losing their license in Arizona, and some complaining from a couple of years ago about bad phone manners, but nothing really helpful.

Working through this church member (who is away at school) is a little like sewing with chop sticks.  It would save time & trouble I if could deal with the CA directly.  The church member has given me a notarized power of attorney for the resolution of debts.

Do you think the church member loses negotiating leverage if, with this power of attorney, I negotiate directly with the CA?

[llecs]

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A_Helper wrote:

Do you think the church member loses negotiating leverage if, with this power of attorney, I negotiate directly with the CA?

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I don't know.

BTW, if the CA or the debtor are based in AZ then be sure to check out licensing on the CA. I think it is something like azdfi.gov or something like that.

[Anonymous]

Thanks again for all the help.

Here is what happened.  I sent the check in today's mail. 

It turned out that Toyota Financial still owned the debt.  Once I confirmed they had received the power of attorney, I wound up doing everything by telephone.  They offered 70%.  I said I had to discuss that with the other trustees of the fund.  I called back and offered 40%, but was willing to settle for 50%.  The phone agent said "of course my supervisior will not accept that."  I told her to call me back when she had spoken to her supervisor.  When they called back they settled at 40%.

I got a fax that stated "Upon receipt of your payment TMCC will consider your account resolved."

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On another note:  I lost my credentials for logging into this forum--they were never sent to me by email.  When I tried to recover my credentials, the site wanted to know my SSN.  That's hinky, so I just reregistered.

[RobertEG]

There is every reason to demand that a consumer pay off the full amount of a debt.

It is what the consumer agreed to pay when the creditor put their funds in the consumer's wallet.

When a creditor offers credit, it is not "funny money."   It is real money paid out.

Any credtitor should expect full payment in return.  I would not paint the collecting creditor as the "bad guy."

Any creditor is fully justified in 100% recovery.

Anyway, any payment wont remove any derogs from the consumer's credit report.

[haulingthescoreup]

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@RobertEG wrote:

There is every reason to demand that a consumer pay off the full amount of a debt.

It is what the consumer agreed to pay when the creditor put their funds in the consumer's wallet.

When a creditor offers credit, it is not "funny money."   It is real money paid out.

Any credtitor should expect full payment in return.  I would not paint the collecting creditor as the "bad guy."

Any creditor is fully justified in 100% recovery.

Anyway, any payment wont remove any derogs from the consumer's credit report.

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Ahh, but in this case, it's not Toyota trying to collect the money that they genuinely lost.

This is a collection agency to whom Toyota sold the debt, doubtless at a deep discount.

Toyota has given up on collecting its money. Now the question is how much the CA paid when buying the account from Toyota. They most certainly did not pay the full value of the debt.

I agree that we should consider ourselves morally (and legally) responsible for our debts. This is a very different scenario: this is asking how much does the CA have invested in this account.