Received offer at 60% of CO blance from CA...what to do?

[money_talks]

I have a CO from Capital One with a balance of $2700. The original credit limit was $1500 so it got to the final balance with fees and interest. No more interest/fees have been added to the balance though in more than a year.

Date of first delinquency 01/2011

Payment made on 06/2011

CO=07/2011

Offer is from ARS National Services, Inc.

"To resolve your delinquent account, please choose one the following options:

1. Settle your account at 60% of the above balance in two installments:

Payment one: $810 due on or before 8-28-13

Payment two: $810 due on or before 9-27-13

2. Good faith payment plan:

Enclose your good faith down payment of $270 (10% of current balance) and send monthly payments of $100 due by the 15th of each month hereafter.

3. Enclose the balance in full

After receipt of your final payment, CAPITAL ONE BANK (USA), N.A. will notify the national credit bureaus - Experian, Equifax, and Trans Union - that you have resolved your account. Contact your account representative for details".

My questions:

1. That last statement that says Cap One will report to the bureaus. What does it mean? If I choose the 60% offer, does that mean Cap One will update the balance to $0 and put a note in my CR saying I settled for less than the balance owed?

2. I was planning on using some of the money I have right now on getting a BOA secured CC. Should I take this offer and postpone the BOA secured CC? What's more important as far as rebuilding credit?

3. Is there any chance I can get Capital One to delete my baddie if I take the 60% offer?

4. It looks like I am still within my SOL of 4 years. I assume Cap One would probably sue before the SOL ends. If Cap One sued, they would sue for $2700 right? So essentially this seems like a good deal? Is 60% a good offer from the CA? Would I be able to get a better offer than this in the future?

5. If I do take the offer, is there anything I have to get in writing from the CA or Cap One?

Thanks!

[Shogun]

You have their offer in writing.  And yes, if it is still within the SOL, you run the risk of having them sue you for the entire amount, plus legal fees.  If it is within your means to pay, then it might not be a good bad idea.  Of course, I don't know your financial situation, but that does seem to be a decent reduction, if it is a valid debt.

edited for my mistake.  

[money_talks]

Shogun, thanks for your quick response.

Yes, the debt is valid. The TL on my CR shows as owned by Cap One. There is no mention anywhere in my CR of the CA.

Would it be worth the try to contact Cap One and ask if they can give me the same offer and settle with them directly and maybe ask for a PFD? Or does it not matter?

[RobertEG]

Their statmenet that they will report satisifaction to the CRAs once final payment is received is not a concession, it is a requirement of FCRA 623(a)(2).

They must promptly update their reporting to reflect a $0 debt balance.

That is true regardless of the amount they accept as satisfaction of the debt.  Current balance: $0.

However, if they accept less than the full amount of the debt as satisfaction, two additional issues remain.

First, they can, if they so choose, separately report the fact that the debt was settled for less than the full amount by reporting a special comment of paid for less.

That statement advises others that, in the past, you did not fully pay all debt that you were obligated, and thus is always a negative reflection.

You can attempt to secure their agreement that they wll not report that the debt was satisfied for less than the full amount, and it will then appear in your credit report the same as if it had been paid in full.

Second, if the difference between the obligated debt and the amount they accept is $600 or more, that excused/cancelled debt must be reported to the IRS by way of a form 1099c, as the IRS considers that as "income" to the consumer for which the consumer must pay taxes unless they are insolvent at the time that portion of the debt was cancelled by the creditor.  You cannot negotiate away that requirement.

[Shogun]

You can try, all they can say is NO, then you would continue anyway.  Always, but always ask.  

[money_talks]

Shogun, will gave Cap One a call today.

RobertEG, so it looks like it is better to have it report as PIF. I need this in writing if they agree to report as PIF if I take the offer, right? Wouldn't this have to come from Cap One though if I end up paying the CA?

[money_talks]

Update: I spoke to a supervisor in Capital One recovery services. She said "Capital One" does not participate in early deletions. She also said I have to pay my debt directly to the CA. Whether I PIF or settle the account for less, they will send the same information to the CRAs. It is then the CRAs who decide how they report it. She said one of the CRAs (maybe Trans Union) report the remaining balance if settled at less than full.

Question to the board:

Does FICO take into account COs with a balance for calculating revolving util? If yes, does this mean if I pay this debt it will help my credit score?

[guiness56]

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@money_talks wrote:

Update: I spoke to a supervisor in Capital One recovery services. She said "Capital One" does not participate in early deletions. She also said I have to pay my debt directly to the CA. Whether I PIF or settle the account for less, they will send the same information to the CRAs. It is then the CRAs who decide how they report it. She said one of the CRAs (maybe Trans Union) report the remaining balance if settled at less than full.

Question to the board:

Does FICO take into account COs with a balance for calculating revolving util? If yes, does this mean if I pay this debt it will help my credit score?

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The CSR is giving you incorrect information.  Settled is settled, the CRAs do not make the decision to report a remaining balance.  That would be the OC.

They may tell you they do not delete early or accept GWs but, they do.

[Shogun]

I agree, CSRs aren't we'll versed in credit reporting. Once a settlement is made, they cannot list a balance.

[money_talks]

Is it a big hassle to dispute if they report a balane after it's settled? If yes, is there anything I can do to prevent this from happening? Maybe send a copy of the letter from Capital One stating it has been settled to each CRA? Since I assume it takes the CRA a while to update the CR.

Also, I've read if you settle in less than full it might not look good on manual reviews. Why would any lender think bad of this? The OC/CA is accepting a lesser payment to settle the account. The OC/CA doesn't have an obligation to do this, but they choose to. You are just accepting the offer. The analogy I think of is going to a store and you see an item at 50% off. Again, the store doesn't have to put that item on sale, they choose to and so you purchase the item. Anyone have other thoughts on this?