What Consumers Should Know About Credit Card Debt Collection

What Consumers Should Know About Credit Card Debt Collection

March 15, 2012         Written By Lynn Oldshue

Debt collection consistently ranks extremely high in any survey or study that tracks consumer complaints. Debt collection is an industry with an aggressive reputation, known to sometimes use strong and harassing tactics in an attempt to collect debt that is past due.

In its 2011 report to Congress, the FTC received more than 140,000 consumer complaints regarding unfair, deceptive and abusive debt collectors.

According to American Banker, the Office of the Comptroller of the Currency is currently investigating JP Morgan Chase for improper credit card collections. The publication cites current and former employees who report that Chase “took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years.” Chase employees report that the Chase card litigation involved unreliable external attorneys as well as poor office procedures. Perhaps as a result of the investigation, Chase stopped suing delinquent borrowers in 2011.

The publication further states that company documents, court filings, and interviews with seven current and former employees reveal “Chase’s credit card litigation operation was allegedly plagued by unreliable external attorneys, management’s disregard for accuracy, and patchy technology.” It also reports that the bank’s computer systems frequently disagreed about how much debtors actually owed.

Collection of bad debt has grown into a billion dollar industry. In 2000, Chase recouped $130 million a year from bad consumer debt of all kinds. By 2009, Chase recovered over $1.2 billion on credit cards alone, according to the American Banker. Litigation became a profitable way to handle bad debt as the bank would charge off more than $20 billion in credit card accounts in 2010 and 2011.

Debt collection is complicated, and some collectors may push the boundaries of the regulations and law to get money out of you. The best way to protect yourself is to be familiar with the laws, and know exactly what you owe and to whom. If the collector is doing something that is illegal, report that company to the FTC.

Collections and Litigation of Credit Card Debt

Your credit card minimum payment is due at least 21 days after you receive your bill. If the minimum payment is late, it will be reported to the credit bureaus (if this is your first time, and you are a good customer, they may not report you until the account is 60 days late).

If your don’t make your minimum payment in 60 days, your account is turned over to the collections department and the delinquency is reported on your credit report. If you can’t make your minimum payment now or over the next few months, this is the time to call your credit card issuer to try to work out a payment plan.

If your account is 90 days past due, this is serious delinquency and you will receive insistent calls and letters from your creditor. Late fees and interest payments will accumulate and your credit card issuer will probably shut down your credit card account.

Beyond this point, your account will be charged-off by your credit card issuer and turned over to a collections agency or a third-party debt collector. The debt collector will contact you through phone calls, emails and letters. The Fair Debt Collections Practices Act provides guidelines for contact from debt collectors. Before you make a payment, verify the amount and the creditor. You may be better off negotiating a settlement with the credit card issuer. The third party collector can even sell your debt to another collector.

If this doesn’t work, the third party collector can sue you and take you to court. They will send you a summons to appear in court. Do not ignore this because if you do not show up, it is an automatic win for the collector. If the debt collector of creditor wins the case and receives a judgment, it can seize assets or garnish wages to pay off the debt. The judge could also create a payment plan.

There is a statute of limitations to sue for credit card debt, and if the date is passed, you can have the case dismissed. This limit is set by the states and varies from three to ten years. It is up to you to know and prove this. The debt collector can still attempt to collect on debts.

Information about a delinquent account remains on your credit report for seven years from the date you first missed a payment.

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The information contained within this article was accurate as of March 15, 2012. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Lynn Oldshue

Lynn Oldshue has written personal finance stories for LowCards.com for twelve years. She majored in public relations at Mississippi State University.
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