@Anonymous wrote:
@Anonymous wrote:
§ 605.(c)(1) In general. The 7-year period referred to in paragraphs (4) and (6) 3 of subsection
(a) shall begin, with respect to any delinquent account that is placed for collection
(internally or by referral to a third party, whichever is earlier), charged to profit and
loss, or subjected to any similar action, upon the expiration of the 180-day period
beginning on the date of the commencement of the delinquency which immediately
preceded the collection activity, charge to profit and loss, or similar action.
...Many mortgage contracts, automobile loan agreements and loan agreements for major installment pruchases carry an acceleration clause.
In, for example, auto loans acceleration clauses can declare default if you use your vehicle in contests of speed or you allow unlicensed, uninsured motorists to operate your vehicle. An acceleration clause can state you are not in default for any missed payments until the creditor decides they have had enough and calls it quits. If you've signed that contract, then it may well be your second or even third missed payment that becomes the delinquency immediately preceding the chargeoff or collection activity. It is precisely situations such as these why Congress never, ever stated anything about "date of first delinquency" and used better, more precise language that can encompass almost every situation instead of those few simple situations that most people assume apply to every credit transaction.
O6, this post of mine is not a statement. It's just a couple of questions to clarify my thinking.
In the case of acceleration clauses, if a creditor invoked the clause, would that usually require the creditor to send a demand letter for payment in full?
Also, if the debtor failed to pay in full by the date cited in a demand letter, with subsequent collection activity by the creditor, would the due date in that demand letter +1 day function as the "commencement of the delinquency", rather than the date of the first missed payment (if, in fact, there ever was a prior missed payment...in your example, I can see that improper use of the collateral could result in a breach, triggering a demand letter and delinquency, without having missed any payments previously).
I am also curious if a past due notice sent by a creditor is construed as a start to "collection activity".
Very good questions! In addition to playing havoc with the SOL, acceleration clauses can skewer CRTPs.
To answer your first, when a creditor invokes the acceleration clause they generally must made a demand for full payment. Whether that demand is made by letter and / or allows for a period of time to pay the note in full prior to being declared delinquent often depends on the terms of the contract and / or the good nature of the creditor. It's important to note than in some major purchase installment contracts such as, for example, an automobile purchase, the creditor may make available a demand letter well after the collateral has been repossessed.
Your last question is not, for me, so simple. I could be wrong, but I would think that a past due notice sent by an original creditor is not the collection activity referreed to in the FCRA. While the FCRA does specifically say placed for collections either internally or with an outside party, I think the automatic generation of a past due notice is not "placing" the account for collections internally. One example of an internal collections placement would be our dear friend AmEx. When they have exhausted their general letter and phone call campaign with respect to delinquent accounts, they then transfer the debt to one of their, for lack of a better word, subsidiary collections operations that are still considered legally as not falling under the FDCPA.
FInally, your second question. In cases where there have been no missed payments yet a default has been triggered by some action or inaction on the part of the debtor, the demand for full payment would, at the expiration of the term, if any, given in the demand, be not only when the cause of action accrues for SOL purposes, but also the date of delinquency immediately preceding collections activity and / or charge to P & L. In the case where previous payments have been missed and the lender invokes the acceleration clause, I, personally, would like to see the previous payment which caused the account never to be brought current as the date of delinquency that immediately precedes, but, alas, that is not usually the case. Unless there is language in the contract that signifies differently, the lender invoking the acceleration clause causes not only the SOL to run, but also the CRTP.
Some other prime examples of acceleration clauses:
1. Acceleration due to failure to pay taxes and having a lien placed on the property;
2. Acceleration for attempt to transfer title or possession of collateral to the prejudice of the lender lienholder;
3. Acceleration due to failure to keep property in good condition in prejudice to lender / lienholder;
4. Actual or appearance of insolvency.
5. Failure to make one or, at the lender's discretion, more payments.
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