Discover Charge Off but in hands of a Collection Agency?

[Brian_Earl_Spilner]

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@vntrsc wrote:

@Brian_Earl_Spilner 

You stated, "While they have no legal right to, some may try to insert it on to a credit report to get a person's attention."

Are you referring to reporting a debt after the 7-year reporting period?

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Yes. We've had reports of it happening on here.

[vntrsc]

@Anonymous 

You stated "One a company charges off your debt, they no longer own that debt - which is why Discover referred you to the collection agency. If Discover still owed the debt, why couldn't you pay them directly?"

Again, "charge off" is an accounting term.  It has nothing to do with ownership of an account.  There is no law that requires the sale of an account after charge off. 

The following is from the U.S. Code of Federal Regulations.

26 CFR 1.166-1 - Bad debts

(f) Recovery of bad debts. Any amount attributable to the recovery during the taxable year of a bad debt, or of a part of a bad debt, which was allowed as a deduction from gross income in a prior taxable year shall be included in gross income for the taxable year of recovery

It states "[a]ny amount attributable to the recovery", then "which was allowed as a deduction from gross income in a prior taxable year".

Those phrases show that a business which claims a tax deduction for a bad debt is allowed to recover some of that debt at a later time. Once it recovers some of that bad debt, it must claim the amount of the recovery as part of its income.  

This is from the Truth in Lending Act - 12 C.F.R. section 226.5(b)(2)(i).

(2) Periodic statements - 

(i) Statement required. The creditor shall mail or deliver a periodic statement as required by § 226.7 for each  billing cycle at the end of which an account has a debit or  credit balance of more than $1 or on which a finance charge has been imposed. A periodic statement need not be sent for an account if the  creditordeems it uncollectible, if delinquency collection proceedings have been instituted, if the  creditor has charged off the account in accordance with loan-loss provisions and will not charge any additional fees or interest on the account, or if furnishing the statement would violate federal law.

Notice the highlighted language.  It states that a creditor does not have to send periodic statements if it is not going to charge additional fees or interest.  If, as according to you, charge off means the company no longer owns the debt, how could it charge additional interest and fees?  If it no longer owns the debt, it could not charge additional interest and fees and would not be required to send "periodic" statements.  

[Anonymous]

So I'm in a very similar situation. Charged Off Discover Account $1500 Balance $500 CL (300% Utilization) from April 2015. I've gotten Discover to stop reporting to EQ but they still report to TU, EX, & Innovis. I was advised initially to never pay back but after reading some comments/posts on here I think I may be better off paying to hopefully be able to reapply for a Discover Secured Card. While attempting to dispute Discover sends a huge packet of bank statements & settlement offers from a CA that I assume they are using to collect on their behalf but the very first page states they still own the debt. I have 2 questions.

1. I now live in Maine but the debt and account are attached to an address in NY. ME's SOL is 6 years and NY's SOL is 7 years can I get them to remove the debt since it's from April 2015 legally paying $0 since I live in ME now or will I have to wait 1 more year since the CC was initially issued in NY?

2. If the SOL is based on the state the CC was issued. Can I pay whatever the CA offers and get it removed since it's been over 5 years which you mentioned in NY is the SOL for Paid Charged Off Accounts?

[Anonymous]

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@Anonymous wrote:

So I'm in a very similar situation. Charged Off Discover Account $1500 Balance $500 CL (300% Utilization) from April 2015. I've gotten Discover to stop reporting to EQ but they still report to TU, EX, & Innovis. I was advised initially to never pay back but after reading some comments/posts on here I think I may be better off paying to hopefully be able to reapply for a Discover Secured Card. While attempting to dispute Discover sends a huge packet of bank statements & settlement offers from a CA that I assume they are using to collect on their behalf but the very first page states they still own the debt. I have 2 questions.

1. I now live in Maine but the debt and account are attached to an address in NY. ME's SOL is 6 years and NY's SOL is 7 years can I get them to remove the debt since it's from April 2015 legally paying $0 since I live in ME now or will I have to wait 1 more year since the CC was initially issued in NY?

2. If the SOL is based on the state the CC was issued. Can I pay whatever the CA offers and get it removed since it's been over 5 years which you mentioned in NY is the SOL for Paid Charged Off Accounts?

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For NY, they will inly remove derogs after 5 years if they are paid/settled, if you did nit know that already. They remain, if unpaid, for 7 years from DoFD.

I believe it is the state you are currently in.

I have heard of people moving to NY and getting paid derogs removed after 5 years. Not too sure if it changes based on where you currently lived or where you accrued the debt.

SOL and reporting period are two separate things. It does not get removed because the SOL is up, they simply cannot sue you. The 7 year reporting window remains even if SOL to be sued has passed. I am from NM where debts fall outside of the SOL after 4 years, but that does not change that they can report for the full 7 years, and they have.

The only difference is in NY, as you know, if a derog is paid, it should be removed after 5 years, instead of 7.

[Anonymous]

So does that mean I should wait 1 year for it to fall off normally or if I pay now can it fall off immediately since it's been 6 years since my last payment? I ask because I'm scared if I pay now it'll extend the SOL by another 5 years or so. My last payment was Oct 2015.

[OmarGB9]

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@Anonymous wrote:

So does that mean I should wait 1 year for it to fall off normally or if I pay now can it fall off immediately since it's been 6 years since my last payment? I ask because I'm scared if I pay now it'll extend the SOL by another 5 years or so. My last payment was Oct 2015.

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I think you're conflating SOL with credit reporting period. NOTHIHG can extend the credit reporting period of 7 years if it has a set DOFD (Date of First delinquency, or when the account first went delinquent and was never brought back current) and was already charged off. As for extending the SOL, that *is* possible by making a payment, partial payment, or promise to pay. But that depends on your state's laws.

[Anonymous]

Thanks for responding. This makes sense, I had a misunderstanding of what the SOL was but that deals more with being sued. From my understanding now, this Account will fall off my Credit Report in 7 years from the set DOFD no matter if I pay or don't pay. Is this correct? I want to pay to patch up the relationship with Discover however I just don't want it to extend the time the Negative Account will show on my Credit Report in doing so. I also was advised to never call the Creditor as I can "wake the sleeping dragon" but if it makes no difference I may as well call Discover and or the CA. The main question is however if I pay now does the 5 Year Rule Apply for NY, since the DOFD is from 2015. This would be great because I can get the Account removed from my Credit Report thanks to NY's Law and have settled/paid the CA/Discover so I can reapply for a Card in the future.

[OmarGB9]

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@Anonymous wrote:

Thanks for responding. This makes sense, I had a misunderstanding of what the SOL was but that deals more with being sued. From my understanding now, this Account will fall off my Credit Report in 7 years from the set DOFD no matter if I pay or don't pay. Is this correct? I want to pay to patch up the relationship with Discover however I just don't want it to extend the time the Negative Account will show on my Credit Report in doing so. I also was advised to never call the Creditor as I can "wake the sleeping dragon" but if it makes no difference I may as well call Discover and or the CA. The main question is however if I pay now does the 5 Year Rule Apply for NY, since the DOFD is from 2015. This would be great because I can get the Account removed from my Credit Report thanks to NY's Law and have settled/paid the CA/Discover so I can reapply for a Card in the future.

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Correct, it can only be included in your reports for up to 7 years and 180 days, though usually it's just the 7 years. Whether you pay or not, it MUST be removed at that point. Now if you want to pay in order to get back in with a specific lender, that's perfectly fine and your choice. That won't affect the fall off date in any way. The reason people say not to contact an OC/CA on a closed charged off account is because you can potentially inadvertently restart the SOL (depending on your state's laws), meaning you can once again be sued for the full amount. Not only that, but if the account has been "dormant" for a while, by contacting the creditor you may cause an update to the negative account, resulting in a "catch up" penalty by FICO because the algorithm will see the negative as "fresh" (even though it's not) and ding your scores.

As for the NY purge law, I would think you could apply it immediately, yes, however I am not entirely well-versed on that, so I'll defer to @Anonymous, as I believe he resides in NY.

[Anonymous]

Yes I am in NY. 

@Anonymous , I believe from clarification I got awhile back that the dropoff depends on your current state, not necessarily the state when the derog occurred. You incurred the derog while in NY but you no longer live in NY, so to my understanding the Purge Law would not apply. Perhaps we can page @RobertEG to nail that down, but that's how I recall what he had said.

[Anonymous]

I still have my NY ID so I can probably utilize the NY Law. I will contact the CA tomorrow and pay then confirm with them that it will drop off since it's over 5 Years. They technically don't know what state I live in either. I will report how it goes.