I was contacted by NCO Financials about a studen loan debt. As it was on the list of items I need to take care of, I took the call and make payment arrangements via an automatic check withdrawal from my account.
I have since found out that I should have never done that and that they will drain my account and take out more than I authorized. I have also found out that this company is one of the worst out there and that they broke quite a few regulations regarding collections.
I need to get out of this and make arrangements elsewhere, I have filed a complaint with the FTC. Two so far actually.
If I authorize them to take out a set amount and they don’t do that, what recourse do I have?
If I block them from accessing my account, will that rack up bounced check fees on their end?
Please help dopers, I can’t afford to have them wipe me out. My first check to them is supposed to be taken out on the 10th of this month.
But, given the fact that he’s already authorized the transactions, will the collection agency then be able to screw his credit rating even more? Otherwise, it’d seem to be a simple matter to tell the collectors “Sure, take money out of my account” then block your account then laugh at the collectors because they couldn’t get their money. Seems dodgy.
Automatic debits are tricky things and usually best avoided unless you competely trust the drawer. Look carefully at the paperwork you signed. Does it really include an amount to debit? Or is it just along the lines of “will debit your account for the payment amount on or about the Xth of each month”? Health clubs were notorious for that type wording. Worse yet, was it just an oral agreement?
While working in the banking industry I saw first hand how auto debit can be abused, and a stop payment can be incredibly difficult to enforce against a shady company. To get around the stop order they will change the amount, or the date, or even the company name by just a bit - enough that the transaction no longer matches the stop order but still fulfills their “contract” with you. I have seen many cases where the only recourse was to close the account and start a new one.
I’m always very wary about allowing access to my checking acct. With online banking it’s much safer to pay bills that way and maintain control.
I don’t know how you cancel the authorization once it’s given. I’d suggest a trip to your bank and a face to face w/ the manager for procedures and/or advice (it’s too easy to blow you off over the phone). You might also try calling your state’s atty. general’s office, they should have a consumer affair’s dept. The authorization you gave may be limited to the amount agreed upon, but you probably have no recored of that beyond your word. I would keep digging until I found out the rules governing this.
I have seen stories like this play out repeatedly on “bad credit folks” message boards and a board for bankers.
The ONLY way to 100% iron-clad keep from getting screwed by unwanted withdrawals is to close your account at this bank.
If you like this bank, close the account and open another one with a new account number. You may wish to let them know that the account number may have been acquired by someone who is untrustworthy, and to place a note as such on the closed account.
Never pay collection agencies with a real check, to prevent shenanigans like this.
Never authorize a direct debit by a collection agency.
I suggest working out payment arrangements with your original creditor if possible.
If you are forced to pay a CA, I suggest Money Orders. 35 cents at Wal-Mart, or 59 cents at my local grocery store.
Ooops. Forgot to mention.
Send them mail indicating that you are withdrawing your authorization for them to debit any and all of your accounts. Certified might be wiser, if it’s worth the $5 in postage.
During a period with health issues & unemployment, I had some experience with collection agencies.
I found that it was better to never pay a collection agency, but make payments to the original company that provided the service to you.
First, they were much nicer to deal with.
Second, I felt better about paying them. They had provided me the service, and deserved to get paid. I know that collection agencies skim off a large part of the payments for themself, so the money doesn’t get back to the company who provided me the service.
I never had a company refuse to accept payments from me, even on old debts that had gone to a collections agency. In fact, they were often surprised and pleased that I was now making payments. Sometimes even seemed that they had forgotten about this debt. Some even offered me deals, waiving interest and penalties.
And then when I got calls from a collection agency, I just said I was making payments to the original company on this debt, and hung up. They often tried to tell me that I should make the payments to them instead. I just said that I didn’t have any idea who they were, but I knew the original company I owed, and I was paying them for the service they provided, not anyone else. Usually, they would continue arguing until I hung up on them.
Only paying people who provided me the service worked out well for me.
I had passed along this issue to my lovely wife, who has in the past worked for several collection agencies specializing in student loan collections. And Mr. Slant’s post above is almost a word-for-word summary of her suggestions. So consider it seconded …
All good advice. But for this particular purpose, here’s what I suggest: get another bank account at another bank. In your original account, keep just enough in to cover your payments and a little extra- say $100. Use the other account for bill paying and such like.
I know you probably didn’t mean it this way, but skim (bolded above by me) makes it sound like they’re doing something wrong. It’s not skimming, it’s taking the contractually agreed upon percentage that is their fee for providing a service to the original company.
All companies have a Bad Debt account. There are different ways of handling and accounting for unpaid debts, but generally a company will use a formula that involves the age of the debt, among other factors, and make adjustments accordingly. If they think they’ll only get 10 cents on the dollar, getting 50 cents on the dollar is much better than not having it paid at all.
Another possibility is that a second company will buy the receivable at a discount. As I understand it, they then legally own the debt and payments must go to them, not to the company the debt was purchased from. So while I generally agree with you and the way you think, I think some caution is probably in order.
I’m not an accountant. This is just what I remember from the one accounting class I took in college.
In the case of the OP, though, the service provided was a loan of money. That note has been purchased by NCO. The OP no longer owes the original lender money, so paying the original lender will not settle the debt.
Did the OP state that the note was in fact purchased by NCO?
The practice of selling uncollected debt is common, as is the practice of paying debt collectors a percentage of debts they collect for you WITHOUT selling them the receivables property in question.
If I missed that in the OP I apologize, but there’s no good reason to assume that your position is the case.
Were I a lender I’d be particularly prone to hold onto this account. It IS a student loan, and the law comes close to considering the lifeblood and soul of the student borrower to be the collateral behind the loan.
The ability that the lender and its agents have to collect are jaw-dropping compared to what credit card companies or, let’s say, medical collections have.
Not so much reason to sell that debt off. You’ll collect, sooner or later. It won’t discharge in a bankruptcy, for jim’s sake…
Depending on the federal program under which the original loan was made, it may very well be untransferable. The three most common student loan programs are NDSL(National Direct Student Loan)/Perkins, GSL(Guaranteed Student Loan)/Stafford, and a third one that is called something like FDSL, but I have been out of financial aid administration long enough that I am kind of delighted not to remember. The NDSL program which became the Perkins program has the lowest interest rate – about 5%, though some of the more recent loans may be at 5.5% or even 6%. There is generally a grace period of a year, a repayment period of ten years, available deferments for further studies and some other things, and the possibility of cancellation of some or all of the debt through various kinds of service, such as teaching in designated (whatever the bureaucratic euphemism for ghetto is). This is federal grant bloc money adminstrated by the colleges. They loan it our, collect the interest during repayment, and loan it back out again. The colleges can contract out the administration of these loans but cannot assign them. The old GSL program became, with a few changes, the Stafford Loan Program. 8% sticks in my mind. This is a loan for which eligibility must be certified by the college financial aid office, but the lending entity is one of a list of lending institutions (almost always banks) authorized to participate in the Stafford program in the state where the college is. The risk to the banks is lower than with most loans and that is reflected in the interest rate. The risk is lower because the Stafford is federally guaranteed. If the borrower disappears or dies or a number of other things, the bank will be made whole with federal funds. These loans can be re-assigned by the original lending institution, though there are limitations on this. The receiver must be federally authorized to participate, yadda, yadda. Many Staffords are serviced by contracting agencies without being sold or assigned. The third class of student loans actually goes by one of two names, neither of which I can be sure of, depending on whether it is a loan to the parent(s) of a dependent student or to a student federally classified as independent. The interest rates for these run much closer to regular consumer debt and vary almost that widely. The credit rating of the borrower can figure into eligibility for these and they can be re-assigned almost in the way that banks can sell their credit card clients to one another. Some of this information is dated. Unfortunately, I don’t know which parts.
SLS – the third class of loans, when made to the independent student, is the Supplemental Loan for Students. Or was. FDSL is the Fire Department of Saint Louis. An easy mistake.
Ran this by my wife again … While an original lender on a student loan might sell it to another lender, if it’s with a collection agency, it was probably defaulted. And with student loans, that means the loan was bought by the government agency that provided the guarantee, usually a state or the federal Department of Education. And those entities can and do pull loans that have been assigned to collection agencies when valid complaints are lodged with them by the debtor. (And this is also why the law treats these debts so much differently. For some reason, the government is more reluctant to discharge debts owed to it than those owed to private individuals. )
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