Expert: John Hall - 1/5/2007

Question
Hi,

Back in June of 2002, a rep from Clout Visa called and offered me a credit card. I had just graduated from high school that May and thought that it was a wonderful idea to have a credit card. Bad mistake!

The bill went out of control in no time, and before I knew it Clout sent me a notice telling me to tear the card up. I had gone over my limit and was being charged finance charges and every other charge that could be billed to me.

The debt is about $1400, but I couldn't afford to pay it at the time due to my school expenses. I was and still am a full time student, living on my own, just barely getting by.

Last month a Pelosino Law office called me and is threatening to take me to court for the debt. The gentleman that I spoke with told me that this could end up costing me $5000, money that I do not have.

I am unsure of what to do, what laws apply, etc. I have not made any promises to this collector, I just asked basic questions. The last message that I received from them was asking for me to have legal representation give them a call.

At this point, what options if any do I have?  

Answer
This is probably a bluff and the bill collector or attorneys office or whatever is probably just trying to take advantage of you because you are so young.   Paying them anything at this point may actually work against you for several reasons including your credit report (the time that the negative would remain is seven years from last paymetn and i you pay anything, the seven years starts again).  Also, if you have a legal defense based on the running of the statute of limitations (should they decide to sue you, which is a questinable assumption), any payment that you would make would restart that time period as well.      Will not paying them anything hurt you insofar as your credit is concerend?  The real answer to that question is that even if you pay them at this time to settle this account, your credit will not be in any better shape because they will mark it down as a paid collection account or as an account that was settled for less than the amount due, both negatives themselves.  By the way, don't believe them if they claim that they will give you a favorable entry on your credit if you pay, or that they will remove the entire entry from your report.   That just doesn't happen and if they say that they will do tht they are lying, there isn't any clearer way to say it than that.  In 25 years I have never seen it happen, regardless of what they say -  it just won't happen.    Even if y ou had a written agreement that they would remove it, what are you going to do if they don't?  Sue them?   Good luck -  Besides   it is just not worth the time and hassle to mess with.  There is such a small amount of money involved it is unlikely that anything will come of this and it will not signficantly affect your credit score anyway.   Doing nothing at this point is probably the best option.  Let me know if they do bring a lawsuit because even then you have options other than paying them anything.  Don't let these knuckleheads get to you -  they are not honest people and they do not deserve this much attention.