Expert: Robert Paisola - 4/24/2006

Question
Hello Mr. Paisola,
My name is Heather Johnson and I have an issue that is just plain infuriating to me. Here's a copy of a fax I sent after a phone call I received from OSI:

February 21, 2006
Attention: Liz Labonte
OSI Collection Services Incorporated
Fax Number 262-780-7447
Re: BGE Home Account

Dear Ms. Labonte:

My name is Heather Johnson (410-223-1874) and I received a call from Cody Ross today concerning a balance owed to BGE Home in the amount of $124.81 which I dispute. I enrolled in the Smart Service – Entire House plan- offered by BGE Home. The cost of the plan was $39.99 billed each month on a Baltimore Gas and Electric bill (utility bill); BGE Home does not invoice their customers directly. I sold my home located at 608 North Branch Court Abingdon, MD 21009 on October 14, 2005. I paid the final bill to Baltimore Gas and Electric on 10/27/2005 in the amount of $217.50. My account number with Baltimore Gas and Electric was 94472-93584. I canceled my service contract with BGE Home as of 09-30-2005. I did speak with representatives from BGE Home in November 2005 and provided them with the information from my bank (located below). They attempted to explain to me that BGE takes their share of the funds first, before forwarding the balance due to BGE Home. I told them that was an issue between the two companies, not me. I paid my account in full immediately upon receiving the final billing; if BGE Home is showing a balance, BGE owes the money, not me.

Baltimore Gas and Electric
BGE -3584 $217.50 10/27/2005    10/31/2005 4MZTF-7Y0NG

This payment was transmitted electronically to Baltimore Gas and Electric on 10/31/2005. Funds were withdrawn from your MYACCESS CHECKING-6106 account on 10/27/2005.

I was initially told by Mr. Ross that they did not report to the credit agencies. I received a notice from Equifax that a collection account had been placed on my credit on 04-21-06. This makes me so angry since I paid the account in full and I provided all the information they requested. Unfortunately, during the move, I can not locate the final invoice I received from BGE. What should I do?

I've opened a dispute via Equifax.

Many Thanks,
Heather Johnson

Answer
Hello Heather,

Let me tell you that dealing with Payco and/or OSI can and usually is a pain in the ***.

Here is a copy of an article that was published on what is becoming known as ZOMBIE DEBT COLLECTION:

Zombie debt collectors dig up your old mistakes

There's a hot new growth industry: companies that buy bad debts for pennies and squeeze you to pay in flagrant violation of federal law. Here's how to get them off your back.

Debbie made a mistake when she was in college.

As a student in Fort Worth, Texas, she maxed out a Citibank credit card with a $300 limit and never paid the bill. Debbie said Citibank charged off the debt sometime between 1987 and 1989, and the liability has long since disappeared from her credit report.

Besides that, the statute of limitations -- the amount of time a creditor can sue over an old debt -- expired in the early 1990s. Both her old home state of Texas and her current state of California generally prohibit creditors from suing once a debt is more than four years old.

That's why she was stunned when a collection agency called her last summer, demanding she pay the 17-year-old bill. The calls have continued off and on since then, along with monthly bills listing varying amounts that the collection agency wants her to pay.Don't let retirement
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“The last time [they called], I told them the statute of limitations had run out on the debt and to stop harassing me,” Debbie said. “They said it hadn't. I finally had to hang up on the man.”

There's money in old debt
A decade ago, most people who reneged on debts could rest easy after several years passed, since few creditors tried to collect on old bills, particularly for small amounts.

Today, however, collecting on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar. Then, they use credit scoring and other new technologies to identify which debtors are most likely to pay. The players in this “junk debt” market range from fly-by-night outfits to well-established companies funded by Wall Street investors.

It's a business that barely existed 10 years ago. In the last three years, it's been growing at a 30% annual rate, according to credit industry analyst Sean McVity of Keefe, Bruyette & Woods. Among the signs of the industry's maturity:


Four debt-buying companies have gone public in recent years, including Asset Acceptance of Warren, Mich., which had its $150 million IPO in February.

Some buyers have attracted major funding from investment banks such as Bear Stearns and Goldman Sachs.

Last year, more than $75 billion in old debts were sold.

The biggest debt buyers
Debt buyer  Headquarters 2002 revenue Debt purchased*
Sherman Financial Group New York $325 million $7 billion
Risk Management Alternatives Duluth, Ga.  $295 million Not available
Arrow Financial Services Niles, Ill. $156 million $2.9 billion
Asset Acceptance  Warren, Mich.  $101 million $5.2 billion
OSI Portfolio Services Duluth, Ga. $100 million $3 billion

Figures are self-reported for 2002.
*“Debt purchased” is the face value of the accounts bought in 2002. Source: Credit & Collections World.

The amount that companies pay for bad debt depends on the type of account and its age. In general, McVity said:


Debts that have recently been charged off: 6 to 7 cents on the dollar.

Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar.

Years-old, out-of-statute debts: A penny or less.
A growing number of companies are discovering that these very old accounts, once thought to be uncollectible, are just the opposite. Squeezing even a small payment from these debtors can make collection activities worthwhile.

“The economics are pretty simple. For $100 of (old debt), you pay 25 basis points -- a shiny quarter,” said McVity, whose investment banking firm tracks debt-buying trends. “If you get (the debtor) to pay you $1, you got your money and covered your costs.”

Opportunity frequently turns into abuse
Where some are finding profits, though, others are spotting abuses. Consumer attorneys say the explosive growth of this industry has led to widespread violations of the federal Fair Credit Reporting Act and the Fair Debt Collection Practices Act.

“I don't advocate people not paying their bills,” said Shreveport, La., lawyer David Szwak, who specializes in consumer law. “But there's an element of the debt collections field that is rabid.” Some collectors, he said, “will go to any lengths to harass people and defraud them.”

Among the worst practices attorneys have seen:


Suing or threatening to sue over debts even though the statute of limitations has long expired.


Illegally “re-aging” debts on credit reports. The collectors tell credit bureaus that an old debt is, in fact, a new one. The goal: To extend the seven-year limit on reporting negative items and put more pressure on the consumer.


Promising to delete a negative mark from the consumer's credit report in exchange for a token payment. Not only does the collector fail to follow through, but the payment can revive the statute of limitations and lead to a lawsuit. Even if the collector does back off, the unpaid debt could be sold to another company that might renew collection activity.


Bait-and-switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged-off debts -- often purchased from other lenders -- onto the balance. The card issuers typically insist they disclosed that the old debts would come with the cards, Szwak said, but the borrowers say no such disclosure was made.


Verbally abusing and harassing consumers. My readers have reported being cursed, berated and called repeatedly despite requests to stop -- all violations of federal laws.
Mickey, a Virginia resident, said he was the target of “colorful words” when he told a collection agency to cease bothering him about an old debt. Mickey stopped paying on his $4,000 Discover card balance in 1994; the account no longer appears on his credit report and the statute of limitations ended years ago.

“They would usually start out with a normal tone. . . . It went downhill fast,” Mickey said. “They were calling a couple of times a day for awhile.”

Sometimes, it's smarter just to hang up
Consumer advocates say this is exactly the kind of behavior Congress and state lawmakers were trying to prevent when they put curbs on collection behaviors such as statutes of limitations, the seven-year credit reporting limit and prohibitions against abusive collection practices.

“We don't have debtors' prisons,” Szwak said. “We have laws to protect people from being harassed by debt collectors for the rest of their lives.”

In fact, paying these old debts -- or even talking to the collection agency about them -- can make a bad situation worse.

As mentioned above, the smallest payment can revive the statute of limitations in some states, leading to more aggressive collections and lawsuits. Even acknowledging that the debt is yours can restart the clock in some jurisdictions.

That's why Robin Leonard, author of the “Money Troubles: Legal Strategies to Cope with Your Debts,” advises consumers simply to put the phone down and walk away if collectors call about an out-of-statute debt. (This chart at Bankrate.com summarizes state statutes of limitations, but details can vary by state.)

Paying off can hurt your credit score
What's more, paying an old debt potentially can wreak havoc on a consumer's credit score. Such a payment can update a delinquency so that it looks more recent and takes a heavier toll on a credit score.

Paying the debt is also no guarantee that the nightmare will stop. The collector may decide that if you're willing to pay at all, you could be made to pay more. Settling a debt for a smaller amount than the collectors says you owe could result in another agency trying to collect the unpaid portion. Or the collector might inform the Internal Revenue Service (IRS) that you've received “income” in the form of forgiven debt. (Yes, there are tax consequences to forgiven debt. See my colleague Jeff Schnepper's article "5 truly nasty tax surprises.”)

Even if you manage to wrangle written promises from the collector that none of the above will happen, you would have to be willing to go to court if the agency reneged -- and possibly face an unsympathetic judge or one who doesn't know much about collections law.

If you're being contacted about an old debt, here's what consumer attorneys advise:

Know the statute of limitations. If you racked up a debt in another state, you might want to check the statute of limitations there as well. But generally, it's the statute of your current state that applies. If the statute has expired, the collection agencies' legal remedies are limited.

Know your rights. Credit and debt collections can be an extremely complicated area of the law. Consider arming yourself with a book such as Leonard's “Money Troubles” and -- if the amounts at stake are considerable or the level of harassment unbearable -- consider contacting an attorney. The National Association of Consumer Advocates can provide referrals.

Consider ignoring the call. If the statute of limitations has expired, Szwak said, put the phone down and walk away. There's little to gain and a lot to lose if you keep talking. You could inadvertently extend the statute of limitations or find yourself roped into a repayment agreement that might not be in your best interest. “The debt collector is a lot smarter than (consumers) are, a lot more savvy,” he said. “They don't have any obligation to tell you your rights.”

Write them. If ignoring them isn't working, consider writing a letter demanding the agency stop contacting you. Send it certified mail, return receipt requested. Federal law requires them to comply with your request. Make sure in the letter you specifically say that you aren't acknowledging you owe the debt.

Negotiate carefully. If the statute of limitations hasn't expired, you may want to negotiate a settlement rather than risk a lawsuit. (Again, a lawyer's advice could come in handy here.) Read “12 tips for negotiating with debt collectors.”

Keep an eye on your credit report. If a collection agency tries to repost an old debt or lie about the date it went delinquent, you'll need to fight back vigorously. Dispute the entry with the credit bureaus and with the collection agency.

If the collector persists in its deception, you can demand that the collector produce a copy of the documentation that created the debt, such as the credit card agreement you originally signed, along with an account history, said consumer attorney Daniel Edelman of Chicago. Chances are the collector won't have this documentation, and continuing to report the account without providing proof that you owe the money is a violation of the Fair Debt Collection Practices Act, Edelman said.

So, Heather, the good news is that this company has been under the FTC radar for years.  Document the heck out of your case and send them a copy of this letter from me. I want you to file a complaint with my friends company www.RipOffReport.com and include a copy of this letter in your complaint.  Also goto another company that I co-own called ProtestOnDemand.com and file a complaint.

If it gets ugly and they still refues to remove the tradeline, I can assist you personally at the discouted allexperts.com rate of $150.00 per for this matter. It will probably be a slam dunk in one hour.

If I get involved, it will not be pretty, but I am sure that you will win, although I can not predict the future.

I hope that this assists you in your quest for information. Please post feedback to the site and feel free to contact me personally if they continue to play games with you.

REMEMBER GIVE THE COLLECTOR A COPY OF THIS LETTER AND HAVE THEM GOTO www.MyCollector.com to See what it will be like if they continue to mess with you.

Regards,

Robert Paisola
CEO
mycollector.com

ABOUT THE AUTHOR:
Robert Paisola is driven by a passion for people--motivating them to reach for the highest standards of success. As founder and president of many International Corporations, Robert trains sales and marketing professionals who want to strive to get to the top...and stay there. His innovative, no-nonsense approach is based on applying what he has observed in his fifteen-plus years in säles, motivational speaking and training, thus revealing the common business habits of the top 20% of säles performers in all organizations.

Robert's approach works...that's why New York-based Success Magazine has rated Robert Paisola as one of the top-five most effective säles-training professional in the market today. Routinely Distinguished by The National Speakers Forum, Robert is also a regular contributor to Business Week Magazine, CNN, CNNFN, XM Satellite Radio, The Wall Street Journal, Telemundo International, National Public Radio and many other organizations.

For more information on Robert Paisola's unique training programs, contact Robert at the Success Training Institute at robert@trumpworldwide.com or at 1-877-517-9555 or visit http://www.allexperts.com/displayExpert.asp?Expert=38419
or www.mywesterncapital.com/people.html

Listen to a LIVE DEBT COLLECTOR TRAINING so you know what I teach the COLLECTORS And Their Managers that TRY to COLLECT FROM YOU!

http://www.mywesterncapital.com/WhyBeACollector.wma