Suing Collection Agencies (Part II)

As I was about to drop the Complaint and Summons in the mail to the Sheriff for service, a light went off.  NCS’ Registered Agent was listed as Joel Lackey, their CEO.  NCS is headquartered in Atlanta, Georgia, presumably because that is where Lackey lives and he is the only owner of the company.  You may be thinking, “and?” – but I was absolutely thrilled.  Joel Lackey cannot be NCS’ Registered Agent in North Carolina – a company’s registered agent for a state has to live in that state.

I had to check but I was certain there could be a major issue here.  Service would continue to be problematic because their registered agent lives in another state.  So what does one do in that situation? Well, you have to serve the Secretary of State.  Having a registered agent – one that meets the requirements of the state – is the law; without one, a foreign corporation cannot receive a Certificate of Authority to practice business.  And in North Carolina, without a Certificate of Authority, a collection agency cannot obtain the required license to collect debts.  And collecting debts without that license in North Carolina is a Class I Felony.

I sent a letter to their contact at that point advising him that I intended to report them to the State at the time I serve the Secretary of State.  And, I added, I was going to request the state administratively dissolve their Certificate of Authority – retroactively.  It would, in turn, dissolve their collector’s license making their collection activity against me now criminal as well.

I sent the letter to them last Friday.  On Tuesday, I received an email indicating they were sending me a check for my settlement demand by overnight mail.  Case closed.

Incompetent Attorneys

Don’t think that just because they have an “ESQ” behind their name or have passed the bar that they can be relied upon to properly pursue your case.  Last December, I began the dispute process with a particularly obnoxious debt collector.  It didn’t take me long to realize that this was not going to resolve itself – nor would it resolve via letters back and forth.  I drafted a Complaint for filing in my state district court.  Why?  Several reasons:  (1) it costs $200 to file in my state’s district court and over $400 to file in federal court, (2) it is perfectly acceptable to file an FDCPA case in local court and (3) if the defendant is not local, it will not only cost them a lot more in attorney fees, you can let them pay to move the case to federal court.

I have been a paralegal for ten years now – I have written plenty of Complaints.  And while I see nothing wrong with being a pro se litigant, I believe a lawsuit filed by an attorney has more teeth.  SO, I found an attorney who had sued the defendant previously and offered him a very simple case.  The Complaint was filed as is – he didn’t make any changes to it.  Basically, all he had to do was sign it and send it with the appropriate number of copies to the courthouse for filing and service.  Lawsuits typically follow a general path from start to finish, as I have shown in the very basic flow chart here.  NOTE:  It is 30 days to Answer in my state – it may be different in yours.  Also, this is a general lawsuit flowchart – by no means intended to represent the way all lawsuits go.

He filed the lawsuit on January 13.  And over the next two months, I heard about settlements I even accepted one settlement offer.  But by the beginning of this month, I was wondering what the hell was taking so long if I accepted their settlement offer.

I ended up having to do some background research because things weren’t adding up.  And lo and behold I discovered that the lawsuit, while it was filed, had never been served.  Why anyone would file a lawsuit and not have it served is beyond me – but it wasn’t.  And here, you have 90 days to get it served or get a renewed summons, and we were on day 85.

No defendant is going to take a lawsuit never served upon them seriously.  The date they are served is the date the clock begins – they have 30 days from that point to Answer the Complaint.  I am essentially starting over.

Needless to say, the incompetent attorney – he is facing a bar complaint and possible malpractice claim.

Who do they pull? Auto Brands and the Credit Bureaus they Use…

Many auto finance companies’ choice of credit bureau varies based on what region of the U.S. you are in.  Overall, though, this is who I have found the following car-makers’ captive finance companies credit bureau of choice:

Mercedes-Benz:  TransUnion
BMW:  Equifax
Lexus:  Experian
Audi:  TransUnion
Volkswagen:  TransUnion (Audi and VW are one in the same)
Jeep (Chrysler):  Experian
Toyota:  Experian
Nissan:  Equifax
Honda:  Equifax or Experian
Ford:  Equifax
Mazda:  Equifax
Hyundai:  Experian
Kia:  Experian

Remember:  the above is for the captive lender only! (VW Financial Services, BMW FInancial, etc.)  If you go to a dealership and apply for credit, they will likely pull all three and send your application to several banks who may choose to pull any or all three credit reports themselves.

Capital One Bank and Secured Mastercard

I remember getting a Capital One card in the 1990s with a $300 credit limit and thinking it was a joke – I did not have any cards with limits under $1,000.  I also remember being told by someone that Capital One was a subprime credit card company and using their card was the equivalent of telling someone you had bad credit.  The only reason I had even applied was because I received offers from them in the mail all the time.

In 1994, Richmond, Virginia-based Signet Bank launched a spinoff company called Oakstone Financial Corporation; a year later, Oakstone changed its name to Capital One.  Throughout the rest of the 1990s, Capital One was a bank that issued credit cards to people who couldn’t get cards from better banks.  They had higher interest rates and annual fees – they were like Providian.  In the early 2000s, Capital One started expanding beyond credit card issuance and working to improve its image and become a “prime” bank.  I was living in New Orleans, Louisiana when Capital One acquired Hibernia Bank, one of the largest banks in Louisiana and a bank I had accounts with.  Louisiana is among the states you will find Capital One Bank branches.

In 2012, Capital One bought HSBC’s U.S.-credit card portfolio.  Part of that portfolio was Orchard Bank, which issued secured and unsecured credit cards.  Anyone with credit issues or who needed to build credit in the 2000s probably had heard of Orchard Bank.  If you were not approved for an unsecured credit card with them, Orchard always offered you a secured card.  When Capital One completed its takeover of HSBC, Orchard Bank began being eliminated. Capital One launched its own secured card in its place, which became being the Capital One Secured Mastercard.  If you are rebuilding your credit and need a credit card, Capital One’s product is a good one overall.

A bit of advice…if you go with Capital One, have your s**t together.  They may not want to look like a sleazy sub-prime credit card issuer anymore but they haven’t become soft or flexible with their policies.  Capital One is unforgiving of those who mess up their accounts and they report negative accounts in a way that hits your credit the hardest and for the longest time.  I am a master at removing bad accounts from credit files and Capital One is virtually impossible to remove by any means.  They keep excellent records on all of their accounts, so getting them deleted on a technicality is very unlikely and they will always respond to disputes.  I recently prepared letters for someone with three charged-off credit cards on his credit reports – two from retails stores issued by Comenity Bank and one with Capital One.  My letter, a goodwill letter, offered to pay the balances on each account in full and explained the circumstances that resulted in the months of non-payment (hospitalization due to an automobile accident).  We received letters in response from all three.  With Comenity, he had only ever charged $29 on one account and $45 on the other but the balances were both almost $300 due to fees.  I offered payment in full in my letter – it was worth it if it got rid of the charge off.  The letters from Comenity, however, adjusted the balances to remove the those fees; in addition, Comenity agreed to delete both accounts as soon as they received payment for the $29 and $45.

Capital One, however, had a much different response.  The account I wrote them about had been a secured card – secured by $700 he had put on deposit.  Presumably due to fees, etc., the balance had swelled to over $1,200.  Again, my letter offered payment in full in return for deletion of the charge-off.  In response, Capital One provided him with a phone number to call to discuss payoff and resolution of the account.  They said paying the balance in full would certainly look good if they decided to consider deleting the account in the future but they would not commit to doing anything though.  The account remains on his credit report.

Pay your account on time, keep your credit under the limit, and don’t have any returned payments and you will be fine.

Capital One also won’t require you pay the full amount of the credit limit as the deposit.  For $49 or $99, you will get at least a $200 credit limit which you can increase in $100 increments whenever you want.  From the time you do the application it will likely be three weeks or so before you actually get your card.  When they say ten business days for the ACH from your bank account to post, they mean it.  Supposedly, Capital One may increase your credit limit at some point without you making an additional deposit.  I have read on several sites lengthy complaints from people about this not happening for them.  It’s a secured card people – if you get a credit limit increase, cool.  If not, send in some more money and increase your limit yourself.  That’s what you should expect with a secured card anyway.  Besides, if Capital One does do it, it won’t be for more than $100.

They have a great website and phone app for making your payments, which post in a day or two. My experience with them has been great so far.

A Way Away from Sallie Mae

Recently I’ve been thinking a lot about the direction I want to be headed financially, my sources of income, and how much money I need to make things happen.

I want to get into real estate investment and I have a lot of ideas about how I want to do this.  Getting my credit repaired and my scores up will be a critical part of making this happen and it is one of the reasons I hit the ground running there.  But there are obstacles remaining I have not yet tackled because I am still trying to figure out how.  Last night, I tried to break things down and determine what was holding me back.

Even as my credit improves and I continue to build it up, there is one account that remains on my credit reports that, while reporting as current/paid as agreed, will no doubt hinder my ability to secure financing for real estate in the future. This is my account with Sallie Mae, my consolidated student loan account, currently reporting a balance of over $81,000.  As I looked over this account in recent months, armed with the knowledge I have now, I am disgusted and ashamed of how irresponsibly I handled this account over the last seven years and it makes me ill thinking of just how much money it will ultimately have cost me.

My original student loans totaled about $54,000 – at least that was the total balance after they had all been consolidated in 2007.  The intended repayment term for most student loans is ten years – the interest rates are low, the payments spread out, and the average person would have them paid off by their early- to mid-thirties.  If I had begun repaying my student loans in 2007 on a ten year plan:

Monthly Payment:  $609.73
Total Principal:  $54,000.00
Total Interest:  $19,167.63

Paying an extra $100 each month would knock two years of payments off the loan and reduce the amount of interest I paid by over $4,000.  That would have been one of the many options that would have been wise and prudent.

I instead let my loans remain in forbearance (and several times, my failure to remember the forbearance had ended allowed them to enter repayment, become delinquent, and put the negative payment history on my credit file I am dealing with today).  Sitting in forbearance, the loan continued to accrue interest that was compounded (made part of the principal) and thus interest on the interest.  The result: my student loan balance is now $30,000 greater but not because of more education.

I am scheduled to enter repayment next month – as my forbearance comes to an end.  In order to pay this debt off in ten years, I would now be looking at the following:

Monthly Payment:   $925.89
Total Principal:  $83,000.00
Interest Paid:  $29,106.00

And don’t forget that $30,000 of the principal IS ALSO INTEREST.  The amount of interest I would be paying is greater than the principal balance.

If I can’t make that much of a payment and I instead pay according to the thirty-year repayment plan:

Monthly Payment:  $511.57
Total Principal:  $83,000.00
Interest Paid:  $102,166.49

Monitoring my credit reports has also helped me see the magnitude of this situation as well.  Each month that goes by, the amount owed on this account increases by over $400.00.  Just to stop it from becoming even greater, I would need to pay over $400 per month!

This balance is comparable in size only to a mortgage – and that is how lenders will see it when I seek financing to buy real estate.  This monthly obligation will affect the total expenses they will consider for me, since it is equal to a mortgage payment of its own.

There is no escaping this loan. It will never expire, never be dischargeable, never be settled.  The only way to eliminate it, is pay it.

I have to figure out how to tackle this loan.  The best solution at this point is to pay it off as quickly as possible – doubling the monthly payment, for example, would pay the loan off in 4 years and would save me over $18,000 in interest paid.  But that would be four years of monthly payments of $1,937, and at this point in my life, not even remotely possible.  What I need is a large, lump-sum payment to immediately reduce the balance enough that the monthly interest being created is substantially reduced.  This would make my monthly payments count for a lot more.

Figuring out how to do so is the trick.

Awareness

Do you know your credit score? If you are thinking no, good answer – very few of us do. If you are thinking you do, where did you get your score?  If you got it from FreeCreditReport.com, you don’t know your score.  If you got it from TransUnion’s or Experian’s websites, you don’t know your score.  More than likely, if you got it from Equifax’s website, you don’t know it, unless you happened to buy ScoreWatch or another Equifax product that includes your FICO score.

Basically, if you didn’t get it from myFICO.com, you didn’t get an accurate score (if you have a Discover card or Barclay Bank credit card, you should be receiving FICO scores monthly – these are good, take advantage of them!).  Vantage Scores, PLUS Scores, and any other non-FICO scores are worthless and a total waste of money.  Lenders don’t use them, you shouldn’t either.

Don’t think I am a Suze Orman junkie though.  Even if you got your FICO score, chances are it isn’t a hundred percent accurate.  Suze never tells you that you actually have 49 FICO scores, as there are 49 different models/formulas lenders can choose from when they pull your credit.  FICO also released an updated score model (FICO08) but even on their own website sell consumers TransUnion 98 scores.

Why does this matter? The most dramatic example, perhaps, can be seen in mortgages.  A $250,000 house will cost you about $1600 a month with a score in the low 600s.  If your score is in the high 700s, that same house will cost you $1200 a month.  $400 a month for 30 years is $144,000.  Think it matters now?

The thing is, both scores qualified for the mortgage loan – one just qualified for a much better one.  How many people just accept the rate they are given?  The credit world affects us as consumers in a major way and banks and creditors have worked hard to keep us in the dark.  The sooner we become involved in this world, the better off we will be.