Alright folks, you’re almost done. You’ve gotten
through the hard part and learned how to draft a settlement offer letter, what
to say on the phone, and how much money to offer. Now, I’m going to teach you
how to complete the settlement deal.
One of the most common problems with settling accounts, if not done properly, is that something as simple as a late payment could mean you wasted hundreds or thousands of dollars. I’ve seen one too many of my clients set up a settlement with three or four payments over several months, only to miss the final payment or be late. When this happens, usually the settlement is blown and ANY money paid gets applied to the full balance leaving 100 percent of the balance due.
I once had a client who had a VERY large debt. The balance was $64,000, and I was able to settle it for $12,000 over 12 months. That’s an 18 percent settlement, pretty good deal if you ask me. My client only had to pay $1,000 a month for 12 months on the 28th of each month and the settlement would be complete. Seems pretty simple.
Every month my client paid on time. However, on the last month my client decided it would be a “smart” idea to mail a check versus giving banking information over the phone as usual. Why he decided this would be a “good idea” is beyond me. Long story short, my client’s check didn’t arrive on time, and he missed his payment date.
A few weeks went by and he received a letter in the mail asking for the rest of the balance on the account. He called and asked for my help. So I called the collection agency and asked what was going on.
Turns out they not only cashed my client’s last check, even though it was late, but they informed me that my client had to pay the remaining balance of $52,000! The entire settlement deal was off. As you can imagine, my client was quite upset. Don’t worry, I ended up taking care of it. After enough hooting and hollering, letters, messages, escalations to managers and so forth, they agreed to stick with the original settlement and closed the account at the original amount.
The moral of the story is this; taking care of your payments properly is JUST as important as the settlement deal itself. There are several ways you can make payments toward a settlement:
One of the most common problems with settling accounts, if not done properly, is that something as simple as a late payment could mean you wasted hundreds or thousands of dollars. I’ve seen one too many of my clients set up a settlement with three or four payments over several months, only to miss the final payment or be late. When this happens, usually the settlement is blown and ANY money paid gets applied to the full balance leaving 100 percent of the balance due.
I once had a client who had a VERY large debt. The balance was $64,000, and I was able to settle it for $12,000 over 12 months. That’s an 18 percent settlement, pretty good deal if you ask me. My client only had to pay $1,000 a month for 12 months on the 28th of each month and the settlement would be complete. Seems pretty simple.
Every month my client paid on time. However, on the last month my client decided it would be a “smart” idea to mail a check versus giving banking information over the phone as usual. Why he decided this would be a “good idea” is beyond me. Long story short, my client’s check didn’t arrive on time, and he missed his payment date.
A few weeks went by and he received a letter in the mail asking for the rest of the balance on the account. He called and asked for my help. So I called the collection agency and asked what was going on.
Turns out they not only cashed my client’s last check, even though it was late, but they informed me that my client had to pay the remaining balance of $52,000! The entire settlement deal was off. As you can imagine, my client was quite upset. Don’t worry, I ended up taking care of it. After enough hooting and hollering, letters, messages, escalations to managers and so forth, they agreed to stick with the original settlement and closed the account at the original amount.
The moral of the story is this; taking care of your payments properly is JUST as important as the settlement deal itself. There are several ways you can make payments toward a settlement:
1.
Check over the phone
2.
Wire transfer
3.
Mailing a check or money order
4.
Paying online with a VISA or MASTERCARD
Sending them a bag full of pennies (I don’t
really recommend this method)
Some people say you should never
give your banking information to a creditor. This is false. In fact, I highly
recommend that you pay toward your settlement by setting up check(s) over the
phone. Creditors aren’t thieves, they’re not going to raid your bank account
and take all your money. That’s illegal, you know it and so do they. It’s a
business transaction. Remember, do some research on the company that you're
paying beforehand, that way you don't bump into one of the slimy ones. The only
time I wouldn’t pay toward a settlement, at all, is if there’s no letter of
agreement. A verbal agreement is as useless as a car with square wheels. In the
event that you need a refund or perhaps take them to court, you’ll need to show
that you had a written agreement in place.
Checks over the phone are also beneficial because you’re making the creditor responsible for ensuring the payment is on time. If a creditor didn’t process your payment on the day you set it up with them, they know it’s their fault, plain and simple. All you need to do is provide your routing and account number and agree to the payment amounts and dates, and they’ll automatically debit your account.
There have been some collection agencies that have screwed up and processed payments late. This is true. Sometimes they’ll even go so far as to say you agreed to the incorrect payment date! In some cases, you just may have. However, most collection agencies record the initial phone call when you set up the payments. Some will go so far as to have another collector double verify the information with you over the phone, or have an independent verification company record your agreed payment amounts and dates. So, if you run into an issue, you can always ask them to pull the tape and listen to it.
NOTE: Some creditors may intentionally set up an incorrect payment. I know, this sounds terrible, but it’s true. There are some sleazy companies out there. The only thing I can recommend is to pay CLOSE attention when setting up the payment dates over the phone. Ask them to repeat themselves or inform them you’re recording the call so long as they agree.
If you don’t feel comfortable with this method of payment, my second choice would be to send a money order or cashier’s check.
Money orders and cashier’s checks are as good as cash. The only concern with this method is that you’re relying on either the post office or some other mail delivery company, and they too can make mistakes. If you’re going to mail a payment, make sure it’s sent certified or something similar so that a signature is received from the other end. That way if you need to dispute anything, you have proof as to when the check was received by the collector. Make sure you give more than enough time for the payment to arrive before the actual due date, even if that means mailing the check two weeks early.
Paying online with your VISA, MASTERCARD or DEBIT CARD can also be a very reliable method, however, not many collection agencies offer this service. If they do, this would be my number one choice.
Wire transfers are good; however, you’re talking about transferring money between two banks. If you have any experience with banking, you probably know that wire transfers can sometimes take days to process. Even if your bank says, “Oh, don’t worry Mr. Smith, a wire transfer will process at midnight and the creditor should have the money tomorrow.” That’s not always the case. Maybe it’s just me, but I try and stay away from wire transfers unless I’m paying a VERY large amount at once ($10,000 or more) or I know I’ve left enough time for the wire to clear both bank accounts before the settlement due date.
Alright, we’ve discussed how to make a payment, now let’s discuss WHEN to schedule those payment dates. As I explained earlier, collectors have a method to their collection madness.
Checks over the phone are also beneficial because you’re making the creditor responsible for ensuring the payment is on time. If a creditor didn’t process your payment on the day you set it up with them, they know it’s their fault, plain and simple. All you need to do is provide your routing and account number and agree to the payment amounts and dates, and they’ll automatically debit your account.
There have been some collection agencies that have screwed up and processed payments late. This is true. Sometimes they’ll even go so far as to say you agreed to the incorrect payment date! In some cases, you just may have. However, most collection agencies record the initial phone call when you set up the payments. Some will go so far as to have another collector double verify the information with you over the phone, or have an independent verification company record your agreed payment amounts and dates. So, if you run into an issue, you can always ask them to pull the tape and listen to it.
NOTE: Some creditors may intentionally set up an incorrect payment. I know, this sounds terrible, but it’s true. There are some sleazy companies out there. The only thing I can recommend is to pay CLOSE attention when setting up the payment dates over the phone. Ask them to repeat themselves or inform them you’re recording the call so long as they agree.
If you don’t feel comfortable with this method of payment, my second choice would be to send a money order or cashier’s check.
Money orders and cashier’s checks are as good as cash. The only concern with this method is that you’re relying on either the post office or some other mail delivery company, and they too can make mistakes. If you’re going to mail a payment, make sure it’s sent certified or something similar so that a signature is received from the other end. That way if you need to dispute anything, you have proof as to when the check was received by the collector. Make sure you give more than enough time for the payment to arrive before the actual due date, even if that means mailing the check two weeks early.
Paying online with your VISA, MASTERCARD or DEBIT CARD can also be a very reliable method, however, not many collection agencies offer this service. If they do, this would be my number one choice.
Wire transfers are good; however, you’re talking about transferring money between two banks. If you have any experience with banking, you probably know that wire transfers can sometimes take days to process. Even if your bank says, “Oh, don’t worry Mr. Smith, a wire transfer will process at midnight and the creditor should have the money tomorrow.” That’s not always the case. Maybe it’s just me, but I try and stay away from wire transfers unless I’m paying a VERY large amount at once ($10,000 or more) or I know I’ve left enough time for the wire to clear both bank accounts before the settlement due date.
Alright, we’ve discussed how to make a payment, now let’s discuss WHEN to schedule those payment dates. As I explained earlier, collectors have a method to their collection madness.
When to make an
offer and payment dates
If you’re going to make a settlement offer, I
suggest that you shoot for the end of the month. That doesn’t mean fax a
settlement letter on the first of the month and offer a payment date for the
30th. (Unless that’s what you want to do of course).
Fax over, or call, in the last week of the month and let them know you have a lump sum amount of money which is available ASAP. Let me tell you, it’s not every day that a creditor receives a call from a consumer with this sort of offer. They’ll try harder to get it approved, and may just fax you an agreement letter that same day.
Again, this is when creditors are desperate to meet their quotas. If you’re unable to offer a lump sum settlement, I highly recommend you offer a bigger chunk of money as the down payment, and spread out the rest over several months. Your offer should state something to this effect:
“$3,000 down May 30th 2012 followed by five monthly installments of $500 on the 28th of each month beginning June until Oct 2012 for a total of $5,500 to settle the account in full ‘Paid As Agreed.’”
As you can see the above is pretty clear in what you’re offering, it includes the exact amounts and dates of each payment, the total amount you’re offering and how you’d like it to reflect on your credit “Paid as Agreed.”
If you’re going to set up multiple payments, I suggest you make the payment dates either for the middle of the month (15th) or the end of the month (28th.) It’s easier to remember. Not every month has 30 days so make sure you don’t schedule all your payments for the 30th. It does depend on your pay schedule.
Fax over, or call, in the last week of the month and let them know you have a lump sum amount of money which is available ASAP. Let me tell you, it’s not every day that a creditor receives a call from a consumer with this sort of offer. They’ll try harder to get it approved, and may just fax you an agreement letter that same day.
Again, this is when creditors are desperate to meet their quotas. If you’re unable to offer a lump sum settlement, I highly recommend you offer a bigger chunk of money as the down payment, and spread out the rest over several months. Your offer should state something to this effect:
“$3,000 down May 30th 2012 followed by five monthly installments of $500 on the 28th of each month beginning June until Oct 2012 for a total of $5,500 to settle the account in full ‘Paid As Agreed.’”
As you can see the above is pretty clear in what you’re offering, it includes the exact amounts and dates of each payment, the total amount you’re offering and how you’d like it to reflect on your credit “Paid as Agreed.”
If you’re going to set up multiple payments, I suggest you make the payment dates either for the middle of the month (15th) or the end of the month (28th.) It’s easier to remember. Not every month has 30 days so make sure you don’t schedule all your payments for the 30th. It does depend on your pay schedule.
Potentially
blown settlements and how to handle
Ok, this section is pretty important. I can’t tell
you how many weird issues I’ve run across during my career settling debts. You
can’t always predict the funky stuff you may encounter, and if not handled
properly, can cost you a lot of money. Let me give you a rundown of some
possible issues you need to look out for.
A “Blow Settlement” is when you have an agreed settlement in place, but it's been broken due to some payment issue or other non-agreement violation. For example, I once had a client who got sued for their debt. I worked out a settlement with the law firm which was spread out over six months. My client was on their fourth payment when I received a call from the law firm informing me the settlement was no longer valid. I asked if all payments were made on time, they said yes. Ok…then what’s the problem? They informed me that their settlement letter had to be signed by the consumer and mailed back to them during the first 45 days of the settlement. Because my client never signed the document, the settlement was off.
He had already made four payments totaling $2,800. I must have threatened everything, but an act of God to just about every manager until I finally got to speak to the actual attorney. From my experience, most attorneys are quite cooperative and will work something out, so both parties are satisfied. This is because attorneys want to go to court about as much as you do. It costs them time and money, and they may not always win. Keep that in mind when working with one. Occasionally you’ll get that hot shot who just wants to make everyone’s life miserable but, for the most part, they’re quite professional.
A blown settlement can usually occur from the following mistakes:
A “Blow Settlement” is when you have an agreed settlement in place, but it's been broken due to some payment issue or other non-agreement violation. For example, I once had a client who got sued for their debt. I worked out a settlement with the law firm which was spread out over six months. My client was on their fourth payment when I received a call from the law firm informing me the settlement was no longer valid. I asked if all payments were made on time, they said yes. Ok…then what’s the problem? They informed me that their settlement letter had to be signed by the consumer and mailed back to them during the first 45 days of the settlement. Because my client never signed the document, the settlement was off.
He had already made four payments totaling $2,800. I must have threatened everything, but an act of God to just about every manager until I finally got to speak to the actual attorney. From my experience, most attorneys are quite cooperative and will work something out, so both parties are satisfied. This is because attorneys want to go to court about as much as you do. It costs them time and money, and they may not always win. Keep that in mind when working with one. Occasionally you’ll get that hot shot who just wants to make everyone’s life miserable but, for the most part, they’re quite professional.
A blown settlement can usually occur from the following mistakes:
Missing a payment
NSF on a payment (Non-Sufficient Funds)
Late payment
Paying the incorrect dollar amount
Not signing the agreement letter and mailing it back
Making payments on a verbal settlement agreement
Making a payment toward a generic settlement letter received
In one instance, an employee of mine asked for help
due to a mistake they had made. A client received an amazing 10 percent
settlement offer letter from a creditor for their $34,000 account. My client
mailed out a check for $3,400 but never called the creditor. A month later, my
client received another collection letter for the remaining balance. Turns out,
there was a teeny tiny disclosure on the bottom of the original letter that stated
that we needed to call and confirm the settlement before mailing a payment.
You’re joking right? I wasn’t surprised my employee missed it. Long story
short, we did sort it out, but I couldn’t believe a creditor would send such a
deceiving letter.
Have you ever received a coupon for something that seems like a great deal, only to find out that you have to buy 10 of the same item to get a lousy dollar off? There may be all sorts of little clauses that they intentionally make obscure. You need to be careful when reading a settlement offer letter.
Another time my employee didn’t read the settlement letter carefully, and it nearly cost him thousands of dollars extra. Turns out the creditor made a mistake adding up the math. This was a long settlement, 24 months of payments. Which is never a good idea unless you have no other option. Anyway, the creditor accidentally missed a payment date on the schedule. Can you find it?
Have you ever received a coupon for something that seems like a great deal, only to find out that you have to buy 10 of the same item to get a lousy dollar off? There may be all sorts of little clauses that they intentionally make obscure. You need to be careful when reading a settlement offer letter.
Another time my employee didn’t read the settlement letter carefully, and it nearly cost him thousands of dollars extra. Turns out the creditor made a mistake adding up the math. This was a long settlement, 24 months of payments. Which is never a good idea unless you have no other option. Anyway, the creditor accidentally missed a payment date on the schedule. Can you find it?
$386.33 January 15 2012
$386.33 February 2012
$386.33 March 2012
$386.33 April 2012
$386.33 May 2012
$386.33 June 2012
$386.33 July 2012
$386.33 August 2012
$386.33 September 2012
$386.33 October 2012
$386.33 November 2012
$386.33 December 2012
$386.33 January 2013
$386.33 February 2013
$386.33 March 2013
$386.33 April 2013
$386.33 May 2013
$386.33 June 2013
$386.33 July 2013
$386.33 August 2013
$386.33 October 2013
$386.33 November 2013
$414.41 December 2013
They forgot September 2013. The accounting
department plugged in all the payments into the system without realizing that one
was missed. You would think, well, it’s the creditors fault! But, the creditor
did put the correct total on the letter which was $9,300. Had my accounting
department done their math they would have realized the payment schedule didn’t
add up. In this sort of grey situation, it can be difficult to know who was
really at fault, so be careful when reading your settlement letter. Do the math
yourself!
Another problem I encountered was a settlement letter that looked similar to the above. It had a long payment schedule, but all the dates were correct. What was wrong was the final payment. The creditor accidentally cut it short by a few pennies. Yes, pennies! When the settlement was complete, or so we thought, the creditor informed us the deal was off, and the remaining balance was due. Wow! The lesson here is to double and triple verify the settlement letter before you make any payments. If the letter is incorrect, immediately call the creditor and request a corrected one.
If the creditor gives you any trouble or says, “Don’t worry about the letter, as long as we set up the payments correctly, you’ll be fine,” hogwash! Get the correct letter, even if that means being transferred to five managers.
If a settlement is blown, the likelihood of getting your money back is very slim. Your chances of meeting the President of the United States are higher than getting a refund. So, if you encounter this type of problem, the goal is to get them to stick with the original agreement. Never, ever implicate yourself as the one who made the mistake.
If you have a situation like the one I gave above, where a payment wasn’t included in the letter or the dollar amount was incorrect, get a new letter before giving them any more money. Timing is also key. If you let this drag on too long, chances are they’ll sell or transfer your account with a remaining balance to a new collector. Which would mean; you would have to convince a NEW collector to agree to someone else’s settlement. It’s possible, but it’s a grueling process that’ll give you a full head of white hair.
If a creditor’s made a mistake and is unwilling to correct it, then your only recourse is to file complaints with the proper agencies. Some agencies file your complaint while others pick up the phone and do something about it. Knowing who to involve in your dispute could save your settlement. I go over that in the next chapter so keep reading.
Another problem I encountered was a settlement letter that looked similar to the above. It had a long payment schedule, but all the dates were correct. What was wrong was the final payment. The creditor accidentally cut it short by a few pennies. Yes, pennies! When the settlement was complete, or so we thought, the creditor informed us the deal was off, and the remaining balance was due. Wow! The lesson here is to double and triple verify the settlement letter before you make any payments. If the letter is incorrect, immediately call the creditor and request a corrected one.
If the creditor gives you any trouble or says, “Don’t worry about the letter, as long as we set up the payments correctly, you’ll be fine,” hogwash! Get the correct letter, even if that means being transferred to five managers.
If a settlement is blown, the likelihood of getting your money back is very slim. Your chances of meeting the President of the United States are higher than getting a refund. So, if you encounter this type of problem, the goal is to get them to stick with the original agreement. Never, ever implicate yourself as the one who made the mistake.
If you have a situation like the one I gave above, where a payment wasn’t included in the letter or the dollar amount was incorrect, get a new letter before giving them any more money. Timing is also key. If you let this drag on too long, chances are they’ll sell or transfer your account with a remaining balance to a new collector. Which would mean; you would have to convince a NEW collector to agree to someone else’s settlement. It’s possible, but it’s a grueling process that’ll give you a full head of white hair.
If a creditor’s made a mistake and is unwilling to correct it, then your only recourse is to file complaints with the proper agencies. Some agencies file your complaint while others pick up the phone and do something about it. Knowing who to involve in your dispute could save your settlement. I go over that in the next chapter so keep reading.
Settled account
being collected by another agency
This can happen, I’ve seen it all too many times.
You settle an account with one collection agency and then a few months later
receive a letter from another company asking for the remaining balance. Don’t
ask me why creditors make this mistake often, but they do. There is a simple
fix. Call the new agency and find out which collector is assigned to the
account. Fax over a copy of your original settlement letter, proof of payments
made (get copies of checks from your bank if needed) and a cover letter
politely explaining that the account was settled, and they need to close out
the account and remove it from your credit report.
Once you fax the documents, follow up in a day or two to ensure they’ve done it. If you don’t have a copy of the original settlement letter, call the collection agency you settled with and request a copy. They should be able to provide it to you.
In some rare cases, after you’ve done the above, you may still receive a collection letter on the same account from a third agency. Grr! This can be frustrating. When this happens it usually means the ORIGINAL creditor keeps passing your account from agency to agency. I highly recommend you fax over the documents to the new collection agency as well as the original creditor. Follow up as usual until the situation is resolved.
When dealing with a credit card company, and you’re current with your accounts, a monthly payment is made, and that’s that. They add their interest every month, and you pay an amount of money, pretty easy. When dealing with delinquent debt, it’s a long process, and every step should be closely monitored, especially if other companies are involved. Following up and making sure that every step is done, is key in this process. Make sure you have everything well documented and always to hand so that you can refer to the account in an instant. Next I want to talk about filing those complaints that I keep talking about, so let’s move on.
Once you fax the documents, follow up in a day or two to ensure they’ve done it. If you don’t have a copy of the original settlement letter, call the collection agency you settled with and request a copy. They should be able to provide it to you.
In some rare cases, after you’ve done the above, you may still receive a collection letter on the same account from a third agency. Grr! This can be frustrating. When this happens it usually means the ORIGINAL creditor keeps passing your account from agency to agency. I highly recommend you fax over the documents to the new collection agency as well as the original creditor. Follow up as usual until the situation is resolved.
When dealing with a credit card company, and you’re current with your accounts, a monthly payment is made, and that’s that. They add their interest every month, and you pay an amount of money, pretty easy. When dealing with delinquent debt, it’s a long process, and every step should be closely monitored, especially if other companies are involved. Following up and making sure that every step is done, is key in this process. Make sure you have everything well documented and always to hand so that you can refer to the account in an instant. Next I want to talk about filing those complaints that I keep talking about, so let’s move on.
