Legal Question in Credit and Debt Law in California

i have a charge account that has been sold to a collection agency can original creditor report the account 150 days past due and charge off


Asked on 6/01/17, 3:02 pm

1 Answer from Attorneys

Timothy McCormick Haapala, Thompson & Abern, LLP

Yes. Credit reporting, other than judgments, has virtually nothing to do with the legal status of the debt. As long as a debt was not paid as agreed, it is reported as such on your credit report, because even if it is sold or written off, or even abandoned, the fact of agreeing to pay and payments not being made remains true and is reportable.

Likewise, a charge-off has no impact on the legal status of the debt. It is an accounting and tax procedure that converts an account receivable into a lost money expense, so they can write it off for taxes. If they then or concurrently sell the debt, they reduce their loss by whatever $0.01 on the $1 they get for it and write off the rest. If they sell it after charging it off, the recognize whatever little they get for it as income. The collection agency buys the debt at a steep discount, sometimes even less than $0.01 per dollar of purchased debt, and almost all in a bundle of hundreds or even thousands of bad debts at a time. They then continue to try to collect the debts. If they buy smart and work hard, they can get more for the bundle of debts than they paid for them, and the difference between what it cost to buy the debts and what they manage to collect is their gross profit.

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Answered on 6/01/17, 3:25 pm


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