As the credit crunch is felt around the world many people are trying to make more room in the family budget by paying off some debt for less than what they owe. Paying off your credit card or other loans for less than the full amount due is known as a settlement. A settlement offer can be initiated by the person you owe or by you, the customer.
As consumer advocates we give you examples and guide you through the steps of a valid settlement offer. We also show you how scams and con games operate so you can recognize them and protect yourself. These cons include the introduction scam, side agreements, second tier, the foreclosure rescue scam and others. We also show you how a debt settlement offer can be turned into a proposal and summarily rejected.
How you can tell if a settlement offer is valid
1. Agree on the terms and conditions
2. Ask the company to mail you a signed copy of the settlement offer
3. If they say you must make a decision right now, tell them to fax the offer to you instead
4. Tell them you will not agree on the phone, but will return a copy of their signed settlement offer to them, with your signature, by registered mail
If the creditor refuses steps 1 – 4 above the most likely outcome will be that you owe the balance after you paid off what you thought would be the settlement. Even if you get a printout from a collection agency demanding money on a reduced settlement payoff, call them and get a signed copy before you do anything.
With any settlement offer, and whenever the lender displays predatory instincts, the terms should be faxed and/or mailed from the lender or their representative to the borrower. It should be signed and dated. This protects the borrower and also brings mail and wire fraud into the mix if it is a scam.
Otherwise, unfortunately, the company is just running a scam to get what they can. Scams of this type are documented and have originated from:
Household – HSBC North America
Even if you go to a business location it is imperative that the manager SHALL SIGN AND DATE the terms of the settlement.
Getting the proof is the main protection for the consumer. With no proof collectors simply say they are getting what you are obligated to pay according to the contract that you signed. Even with proof this can happen:
CM told us “After 5 years of holding my breath, these jerks and their nasty attorney won a judgment against me. I have a signed settlement letter and an email from them saying it has been paid. The judge took 5 months to decide in their favor…………I have an attorney and I have contacted everyone I can think of. Should I just pay and walk away?”
Note: A judgment or judgement, in a legal context, is synonymous with the formal decision made by a court following legal proceedings. At the same time the court may also make a range of court orders, such as imposing a sentence upon a guilty defendant in a criminal matter, or providing a remedy for the plaintiff in a civil matter.
Don’t let this happen to you
I made arrangements with Household Credit Service (Household Bank and HSBC) to make 3 payments of $129.00 for 3 months by bank draft and then my debt would be paid and closed.
Balance of this card was $664.49 and my total payments were $387.00. Now I am receiving nasty phone calls and they are telling me I still owe almost $600.00. They must be nuts. They have charged me again for an annual fee, which is for a card I do not want, I asked to settle, and to CLOSE.
Household is also charging me overlimit and late fees. It is all very unfair. The last phone call was from a woman named Lori Beckman and she was very rude and she threatened me that I will pay or else. This is very upsetting because I have tried, and I asked that this be settled.
The first person that I talked with, and made the agreement with, was a man named Christopher (he did not give me last name) who assured me that this matter was settled if I made the 3 draft payments which I did. Their phone number is 1-800-724-4964 or 503-293-4037.
I had open-heart surgery and do not need additional stress like Household Internationals threatening phone calls, and wish you would investigate this matter for me. Thank you very much.
Summary: Many of the larger credit card issuers like Capital One, HSBC, Bank of America, Citibank, Discover, Chase, American Express and MBNA prefer to make some type of payment arrangement rather than losing your business if you cannot make past due payments. A bad debt write-off or write-down by the credit card company must be reported to the SEC as part of their quarterly earnings statement. You have some power over your credit card company, but getting the collections department or a customer service rep to realize it may be a hard task.