Legality of PFD ?

[Anonymous]

I want to work on 3 baddies from medical stuff.    I recently read that is is against the law for credit agencies to do a pay for delete.    It was in the Federal something or other.  It was FBCR ?? FCRA??   cant remember right now but the laws on credit reporting.     I know there are a bunch of pfd's going on , but am I asking them to break the law?    Thanks for your input. 

[takeshi74]

Where did you read this and what is the basis for the claim?  If it was the FCRA, FDCPA, etc then that source should be able to cite the relevant part.

AFAIK there is no relevant law but I don't recommend relying on what I may or may not know as a reputable source.  It is possible that it may violate an agreement in place but an agreement and the law are two entirely different things.

Regardless, PFD's are possible and frequently used in credit repair.  Some CA's like to claim that they cannot and/or that it is illegal.  They can.  It's a matter of whether or not they are willing to do so.

[Anonymous]

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@Anonymous wrote:

I want to work on 3 baddies from medical stuff.    I recently read that is is against the law for credit agencies to do a pay for delete.    It was in the Federal something or other.  It was FBCR ?? FCRA??   cant remember right now but the laws on credit reporting.     I know there are a bunch of pfd's going on , but am I asking them to break the law?    Thanks for your input. 

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[Anonymous]

AFAIK, basically the law says one can't report inaccurate information to credit bureus. So reporting something positive instead of negative might be inaccurate reporting (besides, the spirit of the laws regarding credit reporting is to protect consumers from harms arising from inaccurate information). However, there is no requirement to report anything, positive or negative. So I don't think deciding not to report negative information (which is what PFD essentially is) is illegal.

[Anonymous]

On another forum somebody suggested it was bribery. However, bear in mind that opinions on the internet are worth what you pay for them.

It would be cool if someone had a definitive answer.

[Anonymous]

The bottom line for the OP is that he can't get in trouble for asking a creditor or collection agency to do a pay-for-delete (PFD).  I think that is his real concern -- could I (the OP) get in trouble for it?  I welcome someone to correct me here if I am mistaken!

With that out of the way, there's a separate question, which is whether the creditor or CA (not the debtor) is doing something shady by agreeing to delete something if the debtor agrees to pay them X dollars. 

Here is why someone could argue that they shouldn't be doing that (purely on legal grounds).

Either the negative information as reported is fully true, or it is partly or wholly false.  If the latter, then (it is argued) the owner of the debt (creditor or CA) has a legal responsibility to delete/correct the false information (once the error is brought to its attention) and the debtor should NOT have to pay them to do so. 

In a PFD situation, it is therefore argued, we must be talking about the record being fully truthful,  Otherwise the debtor wouldn't have agreed to PAY for the deletion.  Therefore the creditor or CO (once being paid X dollars) is submitting a request to the CRA that is asking it to alter a truthful and fully correct record.  But they are not supposed to do that.  The only reason (in theory) that they should request that a record be changed or deleted is because it is stating something untrue. 

That's why (someone could argue) a PFD should not occur.  But does it occur?  Often.  And a consumer's focus should always be to act in his own interest.  I promise you that the credit card companies (and other lenders) do that -- they only act in their interest, because they are a business.  A key step for people in credit trouble is to reorient their thinking so that are thinking with the same calm unemotional self-interest that the creditor or CA has.

So to me the bottom line is that pursuing PFDs is fine for consumers.  The debt owners can always say no.  The "rebuilding" experts here know much more about the practical details of such a strategy.

[Anonymous]

So im trying to find the place where I saw the PFD was a illegal act.  This was in a court proceeding that I read it.    But here is another reason PFD's are difficult. 

Wednesday, April 20, 2011

Death of the Pay for Delete Agreement

Once upon a time, back when the "pay for delete" was still widely available, credit repair was a much easier game to play. Now...not so much.

Don't count on getting your collection account deleted.

Death of the Pay for Delete

Let me explain. For those of you who don't already know, a pay for delete occurs when you pay off a collection and in exchange the collection agency deletes the negative entry from your credit report. The collection agency gets its money and you get better credit. Everybody wins, right? Not exactly.

You see, the credit bureaus have this little hang-up about accuracy. Imagine that. The bigger picture is at stake. The credit bureaus may maintain your credit information, but they make their money selling FICO scores to lenders. FICO scores are supposed to help lenders make financial decisions by accurately predicting your risk of default. A past collection account on your credit report is a great big red flag that practically screams, "Don't trust me! I stopped paying in the past and I'll do it again!" If the collection agencies granted everyone a pay-for-delete, that would skew the FICO's reliability – costing the credit bureaus money in the long run.

(Just for reference, the credit bureaus would really prefer that FICO tank just so they could push their ridiculous VantageScore on lenders, but since VantageScore is also based on your credit information, the same logic applies)

So what do the credit bureaus do? Simple. They lay the smackdown. If the credit bureaus find out that a collection agency has been handing out pay-for-delete agreements to debtors the credit bureau revokes the collector's ability to report debts. That may not sound terrible to you, but its a death sentence to a collection company.

Still Trying to Get Collection Accounts Deleted?

So the scenario goes something like this...you contact the collection agency, make an offer in writing to pay the debt in full in exchange for deletion and sit back and wait with baited breath for the collection agency's response only to receive something along these lines:

Guess who won't play ball?

"We are not authorized to..."

"We cannot alter.."

"Our company does not modify..."

No matter what your form letter says, it can be summed up like this: The credit bureaus don't let us do that. Unfortunately, it usually comes out sounding like "We refuse to help you." This angers you and doesn't help the collection agency either. So you don't pay, the collection agency doesn't make any money, and nobody's happy but the three fat men on the hill (the credit bureaus, who could care less about you and your credit repair efforts).

Prior to the smackdown, pay for deletes were all the rage. Every credit repair forum you visited couldn't say enough about pay for deletes. Everyone had a different method or theory for "duping" the debt collector into accepting the pay for delete agreement. In reality, collection agencies were on board with this. After all, they don't really care if your credit report is accurate either – they just want their money.

Remember, collection agencies still play the game, but for them its a numbers game. Lets look at these two scenarios:

Jane owes $172 to Big Bad Debt Collector for an old cell phone bill she never paid. That $172 debt is really hurting her credit and she'd like to have it removed. Jane's smart enough to know that simply paying it doesn't help her credit one iota, so she writes Big Bad a pay for delete letter in the hopes that it will be willing to erase the negative entry in exchange for payment. 

Money talks....to debt collectors

Josh owes Big Bad Debt Collector a little over $5000 for an unpaid deficiency on an old repossession. Through the help of his attorney cousin and some heavy research, Josh has managed to get rid of the repossession notation – now he just has to deal with that monstrous collection account. Fortunately for Josh, the statute of limitations on the debt has expired so there is no chance that Big Bad could sue him. After six months of saving, Josh has $3700 to put toward the debt, but he won't bother if Big Bad won't delete the collection from his credit. 

So who has the greatest chance of winning the pay for delete game? Josh of course. Collection agencies still hand out pay for deletes, but they choose the recipients with care. The bigger the debt, the greater your odds of getting it deleted. Jane has options for having her $172 debt removed, but a pay for delete isn't one of them.

Now you have to ask yourself, are you a Josh or a Jane? I'm very interested in hearing others' experiences with this. Please, add a comment, let me know how your pay for delete attempt went, be it a good experience or a bad one.

[Anonymous]

It appears after more study that there is no law addressing PFD.    Thank You.

[RobertEG]

There is no law preventing deletion of credit reporting.

Credit reporting is voluntary, and the furnisher can report deletion of their reporting.

The FCRA requirement (section 623(a)(1)) is that what is reported cannot knowingly be inaccurate.

It is not a violation ot have reported inaccurate information.  No statute can mandate human accuracy.

If reporting is considered inaccurate, the FCRA provides a dispute process for compelling investigation by the furnisher, and their reporting of finding as to its accuracy.

If their investigation concurs that the reporting is inaccurate, they can always correct so as to overcome any inaccuracy.

The CRAs have developed, for their own business needs, a policy that furnishers are not to delete their reporting based on payment of the debt.

The CRAs have that policy to preserve the value of the product they sell... credit reports that are as complete as possible.

They incorportate such instructions into their credit reporting manual and their reporting agreements.

Many furnishers will state that it is illegal for them to delete in order to sluff off a consumer, when the real basis is their compliance with their credit reporting agreements.

Theorectically, a CRA could choose to terminate a credit reporting agreement if the furnisher violates the non-deletion based on payment of the debt policy, but since the furnisher need not provide a reason when reporting a deletion, it is a policy with no real enforcement teeth.  I am aware of no furnisher who has had their ability to report to the CRAs termianted based on their non-compliance with the CRA reporting manual.