Time-barred debt

[jeminijad]

When I was 18, I got a credit card. (I am sure this is not a particularly original story ) I charged some things, let my then boyfriend use it, and then did not make more than a payment or two. I was literally never taught a single thing about money as a kid, and it took until 21 to begin being financially responsible.

Fast forward to now- age 26, turning 27. Credit is clear for the past 5 years. I heard little about the credit card (cc) debt, probably because I moved often.

Well, a few months ago a collection agency who acquired the debt began to call me, asking for payment. I pulled my credit report (all 3 bureaus) and the debt did not appear at all, having been 7 years+. I talked to a trusted, money savvy uncle, and he advised me not to pay it as that might bump it back up on the report, which would be worse than leaving it unpaid forever.

My fear is that the agency will be dishonest about the dates involved and try to sue me for the balance. Apparently in some states, verbal agreements made between a debtor and the collection agency can restart the clock on statutes of limitations... there was no verbal agreement, but there are predatory tactics being used here and I believe they may try.

Has anyone dealt with this before?

[annethcz]

www.creditboards.com is a great resource for this type of information.

[living_organic]

Yeah, we made that mistake with one of my husbands debts from the past. We were contacted by a debt collector and after my husband realized it was a legitimate debt that he'd forgotton. We made an agreement with them for paying it off and began the payments. Even though it had never been on our credit reports before...it is now. We reset the clock so to speak. It was almost 7 years old when we reset it...but we did owe it, and wanted to pay it off.

[bronxmom]

Not only is it not on your credit report, but the statute of limitations on collections has almost definitely run out. The original company wrote it off as a loss and took a tax break for it, then sold it for pennies on the dollar to the collection agency now hounding you. They know they can't legitimately collect. Their only hope is to get you to pay up something. Do not pay them and tell them you want them to cease and desist in calling. If they still call, send them a certified letter to this effect. If they still call, then you can sue them.

I think you're pretty safe here as long as you don't fall for their harrassment. Once they realize they can't get anywhere with you, they'll prob move on.

[velochic]

How much is the debt? Could you pay it off? I can't imagine that at 18 they would extend a large line of credit. Perhaps the best thing to do is settle the debt by paying back the money you owe. I know I'm the minority here when it comes to these things, but I think if you spent the money, then it should be paid back. You didn't know better then, but you do now. Sorry.

[bronxmom]

Originally Posted by velochic

How much is the debt? Could you pay it off? I can't imagine that at 18 they would extend a large line of credit. Perhaps the best thing to do is settle the debt by paying back the money you owe. I know I'm the minority here when it comes to these things, but I think if you spent the money, then it should be paid back. You didn't know better then, but you do now. Sorry.

The problem is that if she pays it off it shows up as a delinquent account paid off on her credit report and that brings her credit down. Essentially, she would be punished for paying back what she owes.

Also, on the ethical front: these companies make INSANE amounts of money on credit cards - they get their money back thousands of times over even when (especially when) people don't fully pay it back. And even if you put that aside, the people she borrowed from have already taken the loss and netted a tax break to cover it; she would be paying a new entity that bought the debt for pennies on the dollar. They make their money by harrassing and intimidating people who don't know their rights - so people who have wracked up bad debt (often because of circumstances beyond their control) find themselves in worst positions then they started in. One could easily make an argument that the ethical thing to do is to not make it easier for these companies to continue their predatory, unethical and nasty practices.

[Drummer's Wife]

I agree with everything Bronxmom said, and wouldn't pay them anything. They aren't even who you owe the money to. If you pay it, even if it makes you feel better from an ethical standpoint, it's going to be a big negative on your credit for the next 7 years.

And yes, check out creditboards. They will advise you to not pay a penny on it at this point.

[velochic]

Originally Posted by bronxmom

The problem is that if she pays it off it shows up as a delinquent account paid off on her credit report and that brings her credit down. Essentially, she would be punished for paying back what she owes.

Also, on the ethical front: these companies make INSANE amounts of money on credit cards - they get their money back thousands of times over even when (especially when) people don't fully pay it back. And even if you put that aside, the people she borrowed from have already taken the loss and netted a tax break to cover it; she would be paying a new entity that bought the debt for pennies on the dollar. They make their money by harrassing and intimidating people who don't know their rights - so people who have wracked up bad debt (often because of circumstances beyond their control) find themselves in worst positions then they started in. One could easily make an argument that the ethical thing to do is to not make it easier for these companies to continue their predatory, unethical and nasty practices.

I agree with everything you are saying.

However, what my point is, is that it's not about how "they" (companies) do business, though... it's about how "you" do business. It's about how a person will conduct themselves in their life in general. It has nothing to do with whether or not companies are "ethical". It's about how a person feels about debt... the general attitude. I get the feeling that most people here are saying, "If they don't catch me, if they can't catch up to me, I don't really owe." It's like saying "If they don't catch me, it's not really stealing". I'm talking about how a person feels about *themselves* in regards to finances. Too philosophical, I suppose.

Everyone has their own personal ethics. It's a question of whether or not the person, who spent the money, feels they ought to pay it back. I just brought it up because the debt is a legitimate debt. Letting these things slide can be a slippery slope to ignoring other factors about personal finances. Just because the company gets to write off the debt does not make a person less responsible for debt incurred.

Like I said, I know I'm in the minority here.

[Usually Curious]

Maybe she could write an equivalent check to a charity if her conscience bothers her?

[jeminijad]

So no one seems to have firsthand experience with collection agencies attempting legal action to collect a debt on which the statute of limitations has run out. That is a good thing!

The debt was originally about $250 ($350 line of credit.) The amount now, years later, that the agency is quoting to me is $1100, so I can only assume there are VERY large fees and interested accrued for a long while.

There is no ethical problem for me here. I would find it more wrong to put my family in a pinch now- both by parting with $1100, and by damaging my credit report- to assuage my conscience.

I appreciate the responses.

[PajamaMama]

Then I think in your circumstance I might make a $250 donation to a charitable organization that helps students make responsible financial decisions. I would not destroy my credit over this- If you repay that debt to the collection agency then the original creditor is going to get nothing, you are just encouraging these debt buyers to keep up their practice, and you may damage your credit. I think that there is some merit to the thought that you did get something for nothing though, so maybe it is time for you to pay it forward, either in the way I suggested or something else that feels right to you.

[sassafrass94]

I really like the idea of giving $250 to a charity, too. Paying your debt to the Bank of the Universe rather than to opportunistic debt thugs... jus sayin.