what do i do with this CO from WFDS ?? rep states uncollectible and wont accept payment

[Anonymous]

Hello all, I have a charge off from WFDS that is 5 yrs old. I recently called them to pay it but they guy said I couldn't pay it because it was a uncollectible debt. He said it was past SOL and since he couldn't legally accept payment he would update the account to a 0 balance and state PIF to bureau's. 

I had 2 of them to pay, one I was able to pay and they just updated with the bureau's to show paid in full, but the one that was "uncollectible" did not update and still shows the balance. Since there is still 2 years left on this to fall off I want to pay it and be done, but they wont let me, what do I do???

[RobertEG]

Call and speak to someone higher up in their management chain.

You are speaking with someone who clearly does not know what a charge-off is, and is interpreting it as a cancelled debt.

A charge-off does not excuse continued obligation by the consumer, or prevent teh credtor from continuing to pursue or accept payment of the debt.

It is considered "uncollectible" only in the accounting sense that it is a presumption that the debt is not expected to be paid, and is required under federal regulations to be charged to profit and loss.

It is still a valid debt unless they take the additionaly measure of cancelling the debt, which then requries, if the amount of the cancelled debt is $600 or more, to report the cancellation to both you and the IRS via a form 1099c.

[RonM21]

Going by what he said, I'd defintely make the call to somwone higher up and see what they say. Rob is likely right that the person you talked to may not have known what they were talking about.

[Anonymous]

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@RobertEG wrote:

Call and speak to someone higher up in their management chain.

You are speaking with someone who clearly does not know what a charge-off is, and is interpreting it as a cancelled debt.

A charge-off does not excuse continued obligation by the consumer, or prevent teh credtor from continuing to pursue or accept payment of the debt.

It is considered "uncollectible" only in the accounting sense that it is a presumption that the debt is not expected to be paid, and is required under federal regulations to be charged to profit and loss.

It is still a valid debt unless they take the additionaly measure of cancelling the debt, which then requries, if the amount of the cancelled debt is $600 or more, to report the cancellation to both you and the IRS via a form 1099c.

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I'm running into this issue with WFDS. They wouldn't let me pay off the debt and instead told me it would be charged off and I would receive a 1099c at the end of the year. Instead, they updated it as a charge off and still having a reporting balance. My scores have come up, and with the last round of credit applications, I was denied by CITI and AMEX with the sole reason being this balance.  

Would there be any legal reason for them to still report a balance, and issue me a 1099c? If they will not let me pay the balance, or address the debt, what recourse do I have to get this cleaned up or removed from my report? I've filed a dispute with all 3 credit bureaus, and it has come back in favor of WFDS and no adjustments have been made.

[RobertEG]

There are two situations where a debt, charged-off or not, will be denied acceptance of payment.

First is if the creditor has sold the debt.  In that case, only the new owner or their assigned debt collector can accept payment.

The original creditor must promptly update their reporting to show $0 balance once they have sold the debt.

Update to $0 does not mean the debt no longer exists if you have not paid it; it means that the prior creditor no longer owns the debt.

Second is if the credtior has formally cancelled the debt.   Taking a charge-off does not cancel the debt.  A charge-off per se is only an internal accounting measure.

In accounting terms, it is considered to have become "uncollectible" in the sense that it is not likely to be repaid.

If they additionally cancel the debt, the IRS then consideres the cancelled debt to become "income" to the consumer since he/she no longer has any obligation to repay.

If the debt is $600 or more, the creditor is required to send a form 1099c to the consumer and the IRS, which then raises a possible issue of taxation on the cancelled debt.

A debt that is settled for less than its full amount also results in the cancellation of the difference.  Thus, a debt of $2000 that is settled for $1100 results in cancelled debt of $900, which is reported by sending a 1099c for that amount.

[Anonymous]

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@RobertEG wrote:

There are two situations where a debt, charged-off or not, will be denied acceptance of payment.

First is if the creditor has sold the debt.  In that case, only the new owner or their assigned debt collector can accept payment.

The original creditor must promptly update their reporting to show $0 balance once they have sold the debt.

Update to $0 does not mean the debt no longer exists if you have not paid it; it means that the prior creditor no longer owns the debt.

Second is if the credtior has formally cancelled the debt.   Taking a charge-off does not cancel the debt.  A charge-off per se is only an internal accounting measure.

In accounting terms, it is considered to have become "uncollectible" in the sense that it is not likely to be repaid.

If they additionally cancel the debt, the IRS then consideres the cancelleddebt to become "income" to the consumer since he/she no longer has any obligation to repay.

If the debt is $600 ofr more, the creditor is required to send a form 1099c to the consumer and the IRS, which then raises a possible issue of taxation on the cancelled debt.

A debt that is settled for less than its full amount also results in the cancellation of the difference.  Thus, a debt of $2000 that is settled for $1100 results in cancelled debt of $900, which is reported by sending a 1099c for that amount.

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Thank you so much for your response. I was starting to go a little crazy trying to figure this out.

My explanation from WFDS is that they will be sending me a 1099c and not seek to pursue the debt any further. 

It's listed as the following on my CR:

EX- Account Status, Closed. Payment Status, Charge-off. Balance, $7441

EQ-Account Status, Closed. Payment Status, Bad debt & placed for collections & skip. Balance, $7441

TU-Account Status, Closed. Payment Status, Charged off as bad Debt. Balance, $7441

All balanced Updates were on July 21st, 2017

As previously mentioned, I disputed with all 3 CB last month. They all found the records to be accurate per WFDS. 

Per a customer service rep, I was told to dispute with WFDS directly, and that was sent in last week. My dispute with them was that the account balance should be reported as zero.

Are there any other steps I can take? I'm leery of starting another dispute with the Credit Bureaus, and very doubtful that WFDS will accurately report my record. They refuse to send me anything regarding the charge-off, account being closed, other than the 1099-c, which they say will be sent at end of year. Are they under no obligation to update the balance until that 1099-c is issued?

Any and all thoughts on this are much appreciated. This is the only thing on my credit report that's causing issues at this point, and I'm looking to get a mortgage next year. Given Citi and Amex's response to my CR, I can't imagine getting a better reaction when applying for that... 

[RobertEG]

I would argue that, if they wont accept an offered payment of the debt on the basis that they have cancelled the debt, that mandates prompt update of your credit report to show that the debt is now cancelled (i.e., $0 balance).  They cannot refuse to let you pay the debt, and thus get the balance updated to $0 by its payment, and also refuse to update the debt to $0 based on their cancellation of the debt.

I would file a formal complaint with the CFPB, who has jurisdiction over admin interpretation of the FCRA.

The relevant provision of the FCRA is section 623(a)(2), which requires a party who has reported information to a CRA to promptly update that reporting so as to reflect its current accuracy.  They are refusing to promptly update to reflect their stated cancellation by prompt reporting of a $0 balance.

[Anonymous]

Thank you so much!!!