The background information is something like this: I went delinquent on a student loan (private) after a period of financial hardship.
It defaulted and went over to NCO Financial for debt collections. I wasn't sure how the whole process worked at the time, and I started a payment plan. My agent at NCO was named John and would call every month after the 15th to get a monthly payment. He seemed cordial enough...I was making regular payments via debit card over the phone. This would prove to be a three year plan (so far) and Jim would occasionally ask me if I could settle and told me that they could do 85% of the amount or they would field an offer.
We discussed this and decided I would make minimum payments to keep my account in good status but set aside money for the lump sum settlement to save money, making an offer for less than the 85% (although that number was never formally approved and I was still paying on the loan and bringing the total amount down).
While in the midst of repayment, Jim leaves the company and I receive a new agent to deal with. My debt was now down to around $4,000 and I continued making payments ($200 a month, I had increased it from $100 on my own terms). When I mention to the new agent, Mia, about the plan Jim and I had worked through, she at first played coy that they ever settle.
After a few months I felt like I was in a place to make a lump sum payment. The debt was now at around $3,600 and I made an offer of $2,800. Over the phone, Mia told me that that was a reasonable offer and they were likely to accept, she just had to take it to original loan lender to see if they would accept.
She said she e-mailed the lender and they had declined my offer because I had been so consistent with the loan payments (nearing two years of consistent monthly payments) and unless I could make a case for pending financial hardship, it was within their interest to keep the monthly payments coming or to accept a counter offer of $3,100.
Now I felt like I was being refused because of good behavior, and that if I was inconsistent they might have felt more so the need to settle early. I also felt like I made a reasonable offer (further encouraged by my NCO agent) and perhaps it'd look more appealing if I went a few months without making a payment.
So a few months go by and I am still in communication with them, but they refuse the offer still. Now they are threatening litigation since I have gone without payments. I decided to do some research (what I should have down before ever making the first payment).
Basically, I heard of collection agencies buying debt for pennies on the dollar, so my first thought was playing hardball, rallying for some unforeseen but lower number closer to the amount they may for paid for my own loan. If they counter with $3,100, I counter even lower than my initial offer and lay off some payments. I still can't believe they would take me to court with an offer on the table at only $300 less than their desired settlement.
I then called up my original lender to see if I could work with them directly. They pulled up my account, verified the amount and date of last payment, and that I was in fact dealing with NCO.
They told me that they never settle for less than the full amount (not even the guaranteed 85% I was told from the beginning) and said that it was completely with NCO to settle the loan for them.
The man I talked to also said that they don't and wouldn't receive my offer to settle like NCO led my to believe, which made me think my agent was actually seeking approval for the settlement with her own manager, who in turn hoped to glean more money from me.
Basically, the lender doesn't meddle once it turns over to NCO...it was up to NCO to collect. And yet it has to be satisfied with the lender, which implies NCO didn't outright purchase my loan, and he also said they themselves wouldn't sue, that would again be NCO.
Interesting that I can't work with them directly and cut out NCO (refusing payment from a borrower!), and at this point, they are implying that by NCO taking anything less than the full amount, they are doing me a favor!
So now I am trying to move forward (without being sued) and I realize that guessing whether or not that is an idle threat is just speculation. I have been researching NCO and their tactics and have even read some horror stories of people settling for a percentage of the whole and that amount not satisfying the loan, or still showing up as something to the effect of "paid but not in full" on credit statements.
Is a monthly payment plan really the only way to go to clear this debt off my back? And to think if they took my offer I would have made another debit card payment over the phone in what amounts to essentially good faith...I still don't think I have any actual documentation from NCO (they even refuse to e-mail me payment receipts, instead insisting to read a confirmation number over the phone).
I guess I'm looking for advice to proceed and pay as little of the full amount as possible, and also get the proper documentation so it can't ever come up again. Part of me thinks my NCO agent is just playing me for being on my side against the lender, but ultimately this just being another lying tactic.
Would a debt collection company really sue you when a settlement is on the table for a few hundred less with $3,600 remaining on the loan? Did my agent let slip that they ultimately would settle for my offer, but perhaps they are holding out for more and initiating scare tactics (litigation)? It is also frustrating because when I called NCO last, they juggled me around operators (first available) who apparently have very bad memory and some who flat our deny the possibility of settling.
I finally asked who my agent was (Mia) and asked that she call me back. That was 5 days ago. How can they threaten litigation for going too long without payment but then go days without returning a phone call to me when I am looking to make traction on the loan?
Thanks for reading this long, rambling message.
The good news is that you've learned a number of valuable lessons because of this event.
Corporate Logic is Different Than Personal Logic - The first lesson is you were trying to apply everyday logic to a process that is dictated and managed by a corporate process. Applying logic or assumptions to a corporate policy is never going to work. The agents are limited by the policies and procedures in place at the time of the event. It might have been the policy at the time you were current was you had to be late but that could have quite easily have changed by the time you were late.
Get It in Writing - Whatever the representative told you was worthless unless they put it in writing. It doesn't matter what any representative said or offered unless they made you a firm written offer and you accepted that offer.
Don't Intentionally Default on a Private Student Loan If You Can Pay - There are dire consequences to defaulting on a private student loan. Period. Full stop. Trying to force the hand of a private student loan lender by intentionally defaulting only opens you up to hurting your credit, lowering your credit score, getting sued, getting wages garnished, and the addition of up to a 20 percent collection penalty.
It Hardly Costs the Lender Anything to Sue You - Refer back to the first lesson here. A lender has law firms on retainer and contract. Dropping another low dollar debt into the hopper does happen. It really doesn't cost the lender a whole lot to sue and I've seen people sued over less than a couple of hundred dollars.
Debt Collectors Are Not Debt Buyers - A third party debt collector does not own your debt. They are acting as an agent of the debt owner and they have not paid "pennies on the dollar" for your debt. They are not in a position to negotiate, except in certain pre-defined situations as defined in the contract they have with the debt owner.
Not Everyone Settles - If the debt owner told you they will not settle, then they will not settle. I think that's a pretty clear indication what their current policy is.
And Even If They Did Settle - Settling a debt has consequences. It's not a get out of debt for less approach. The debt forgiven will be reported as a bad debt on your credit report and you may owe income tax on the forgiven debt. For more details about settling your debt see Debt Settlement Pros and Cons. My No BS Guide to Settling Your Debt.
My advice at this point is you should get this loan rehabilitated by getting back on a regular payment plan and pay the thing off. Oh yes, and don't do this again without first checking with me or some other debt coach or qualified professional. Mark this down as a bunch of lessons learned.
You might also want to get a consolidated credit report so we can see how bad the damage caused by this is and come up with a plan to start dealing with that.
Please post your responses and follow-up messages to me on this in the comments section below.
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