$20K AMEX account closed because I stopped paying. What happens now?
January 16, 2015 12:53 PM Subscribe
Wife lost her job for a few months and I was trying to swing our mortgage and $500 monthly AMEX payment. Talked to AMEX to try and work out a plan and they said “just pay it when you can”. That was a couple months ago. The account is now closed and I assume they "sold it". If they sold it to a collection agency, can I negotiate with the agency?
I didn't pay AMEX, so how can I pay a agency? If they bought the account for $5,000 I'd do whatever I can to pay that, but am I legally obligated to pay the $20k if they bought it for $5,000?
What about statements? When I go back to paying monthly, will I get statements from the collection agency?
FWIW, I still owe my November mortgage of 3k which I'm about to pay today. The credit card bill is secondary. Hopefully I'll back on track when my wife starts contributing to the household (me). She stopped when she lost her job. She got another job. but isn't contributing because she has her own credit card woes (she's really bad with money and much of the AMEX purchases are hers).
I didn't pay AMEX, so how can I pay a agency? If they bought the account for $5,000 I'd do whatever I can to pay that, but am I legally obligated to pay the $20k if they bought it for $5,000?
What about statements? When I go back to paying monthly, will I get statements from the collection agency?
FWIW, I still owe my November mortgage of 3k which I'm about to pay today. The credit card bill is secondary. Hopefully I'll back on track when my wife starts contributing to the household (me). She stopped when she lost her job. She got another job. but isn't contributing because she has her own credit card woes (she's really bad with money and much of the AMEX purchases are hers).
I would not assume that the account being closed means that the debt has been sold to a collections agency. After prolonged non-payment their risk management calculations probably tipped in favor of not extending you any further credit.
How did you even find out that the account was closed? Were you trying to log in online? Did you receive a mailing? Check whatever you're looking at closely for a call center phone number, my guess would be that your account has been closed to new activity but transferred internally to another department in charge of collections.
posted by books for weapons at 1:45 PM on January 16, 2015 [1 favorite]
How did you even find out that the account was closed? Were you trying to log in online? Did you receive a mailing? Check whatever you're looking at closely for a call center phone number, my guess would be that your account has been closed to new activity but transferred internally to another department in charge of collections.
posted by books for weapons at 1:45 PM on January 16, 2015 [1 favorite]
Don't make assumptions, call them. I got emails and phone calls for months warning me before a bank closed my credit card (and I had no balance). They won't just close it and sell it to collections without telling you.
I had a large balance on a different card and was unable to pay. I called and they told me I could pay X amount per month at a drastically reduced interest rate. Please call and ask. Be aware they will ask you very detailed questions about your current finances and monthly bills before they make you an offer.
posted by desjardins at 1:50 PM on January 16, 2015
I had a large balance on a different card and was unable to pay. I called and they told me I could pay X amount per month at a drastically reduced interest rate. Please call and ask. Be aware they will ask you very detailed questions about your current finances and monthly bills before they make you an offer.
posted by desjardins at 1:50 PM on January 16, 2015
Re collections agencies, this article was an interesting read, and would be a worthehile read for anyone who's had a debt go to collections.
posted by doctor tough love at 2:00 PM on January 16, 2015 [1 favorite]
posted by doctor tough love at 2:00 PM on January 16, 2015 [1 favorite]
Talked to AMEX [...] a couple months ago. The account is now closed and I assume they "sold it".
This seems unlikely. The account being closed probably reflects the fact that they are unwilling to extend you further credit. But until someone at AmEx actually tells you so, I don't see why you're assuming that they've sold your account debt. If you've had a decent relationship with them so far, they expect to make more money from you directly than they would from selling it to collections...?
posted by RedOrGreen at 2:06 PM on January 16, 2015
This seems unlikely. The account being closed probably reflects the fact that they are unwilling to extend you further credit. But until someone at AmEx actually tells you so, I don't see why you're assuming that they've sold your account debt. If you've had a decent relationship with them so far, they expect to make more money from you directly than they would from selling it to collections...?
posted by RedOrGreen at 2:06 PM on January 16, 2015
Closed does not mean charged-off and sold. Call them.
You may also want to talk with your wife about priorities. Mortgage trumps credit cards. If you're behind on the mortgage, you both should be prioritizing paying that before other debts.
posted by quince at 2:14 PM on January 16, 2015
You may also want to talk with your wife about priorities. Mortgage trumps credit cards. If you're behind on the mortgage, you both should be prioritizing paying that before other debts.
posted by quince at 2:14 PM on January 16, 2015
Talked to AMEX to try and work out a plan and they said “just pay it when you can”. That was a couple months ago.
Were actual payment arrangements with AMEX set up at the time of the conversation? Or did you take their "just pay it when you can" to mean that you could 'ignore' the past-due letters/debt and send what you could (ie: not the min payment or nothing at all)? I'm getting the impression that the AMEX debt was put on the back-burner and essentially forgotten while more pressing bills took priority. This is understandable, of course, but did it also mean that, after your original conversation with AMEX, you pretty much stopped communicating with them about your debt?
I used to work for a credit card company (not AMEX, so YMMV) and past-due accounts were generally handled as such:
If the account owner called in before the account went past-due, they were routed to retention specialists who had some (minimal) authority to change interest rates or provide other perks that may prevent having to close the account or send it to in-house collections. Occasionally, reduced monthly payments could be worked out -- but this still required the account be placed on 'hold' - with no ability to be used until brought current. More often than not, customers would call in advance in an attempt to inform the company that they wouldn't be making payments -- generally in hopes that informing someone about future lack of payment would prevent past-due/collections notices and the hold/closure of their account. Didn't work. The account was put into the in-house collections queue pretty much within 48 hours of going past-due. It was an automated process.
Once the account hit 2 months of being past due it was automatically closed out -- mostly to prevent the card owner from continuing to rack up debt that they were not making payment on. In-house collections would still attempt to work out payment options at this point, but I believe after 3 months past due, with no payment ever made on the account in that time, the account was charged-off and sold to an outside collections agency which had far more aggressive tactics/success in collecting from credit debt.
If AMEX sold your account, they would have to inform you of such. If they did sell your account to an outside collections agency, you would then negotiate your AMEX debt with them -- not with AMEX. If your account is being handled by AMEX's in-house collections, you'd continue to deal with AMEX.
I didn't pay AMEX, so how can I pay a agency?
They will be able to take payment from you just like AMEX can -- over the phone, via check, etc). But if you're asking how the agency can make you pay... the answer is that they can't. If it came down to it, they could sue you for repayment just as any other business could though.
If they bought the account for $5,000 I'd do whatever I can to pay that, but am I legally obligated to pay the $20k if they bought it for $5,000?
Hmm. IANYL, so I don't know about legality, but let me put it this way. AMEX sold the debt for a loss because they know their chances of recouping the full amount is slim (they are not in the collections industry). For them, something is better than nothing at all. So the collections agency shells out 5k to AMEX, essentially buying the 'rights' from AMEX to collect the full 20k debt from you. They now have a 20k debt they can attempt to collect from someone who doesn't know how the industry works or what their rights are. Anything collected over 5k is pure profit for them and so they'll use every single trick in their arsenal (some illegal/strong-arming) to try and recoup as much of the debt as they can. Lump settlements are a popular tactic. You know you owe 20k, so they come in and say they'll wipe the slate clean if you settle for 12k. You think 'Wow... 8k of debt, gone! Saviors!' and accept. That collections agency just landed 7k in profit.
But as I mentioned above, there's no way for the collections agency to really enforce any of this. Credit card debt is not secured (hence the higher interest) and their only method to truly recoup anything from you is to take you to court. Because your debt is fairly high (20k), this is a definite possibility.
What about statements? When I go back to paying monthly, will I get statements from the collection agency?
Once you arrange a repayment plan, yes, you will probably get statements from the new collections agency. Before that happens, you'll probably get various letters attempting to collect on the debt and encourage you to arrange a repayment plan or settle at a lump sum.
Finally, you'll need to contact AMEX to find out whether your debt is in their in-house collections or if it was charged-off and sold. Also, when it comes to settling: haggle. Low-ball them for settlements and insist credit report clean-up along with the deal.
posted by stubbehtail at 3:22 PM on January 16, 2015 [1 favorite]
Were actual payment arrangements with AMEX set up at the time of the conversation? Or did you take their "just pay it when you can" to mean that you could 'ignore' the past-due letters/debt and send what you could (ie: not the min payment or nothing at all)? I'm getting the impression that the AMEX debt was put on the back-burner and essentially forgotten while more pressing bills took priority. This is understandable, of course, but did it also mean that, after your original conversation with AMEX, you pretty much stopped communicating with them about your debt?
I used to work for a credit card company (not AMEX, so YMMV) and past-due accounts were generally handled as such:
If the account owner called in before the account went past-due, they were routed to retention specialists who had some (minimal) authority to change interest rates or provide other perks that may prevent having to close the account or send it to in-house collections. Occasionally, reduced monthly payments could be worked out -- but this still required the account be placed on 'hold' - with no ability to be used until brought current. More often than not, customers would call in advance in an attempt to inform the company that they wouldn't be making payments -- generally in hopes that informing someone about future lack of payment would prevent past-due/collections notices and the hold/closure of their account. Didn't work. The account was put into the in-house collections queue pretty much within 48 hours of going past-due. It was an automated process.
Once the account hit 2 months of being past due it was automatically closed out -- mostly to prevent the card owner from continuing to rack up debt that they were not making payment on. In-house collections would still attempt to work out payment options at this point, but I believe after 3 months past due, with no payment ever made on the account in that time, the account was charged-off and sold to an outside collections agency which had far more aggressive tactics/success in collecting from credit debt.
If AMEX sold your account, they would have to inform you of such. If they did sell your account to an outside collections agency, you would then negotiate your AMEX debt with them -- not with AMEX. If your account is being handled by AMEX's in-house collections, you'd continue to deal with AMEX.
I didn't pay AMEX, so how can I pay a agency?
They will be able to take payment from you just like AMEX can -- over the phone, via check, etc). But if you're asking how the agency can make you pay... the answer is that they can't. If it came down to it, they could sue you for repayment just as any other business could though.
If they bought the account for $5,000 I'd do whatever I can to pay that, but am I legally obligated to pay the $20k if they bought it for $5,000?
Hmm. IANYL, so I don't know about legality, but let me put it this way. AMEX sold the debt for a loss because they know their chances of recouping the full amount is slim (they are not in the collections industry). For them, something is better than nothing at all. So the collections agency shells out 5k to AMEX, essentially buying the 'rights' from AMEX to collect the full 20k debt from you. They now have a 20k debt they can attempt to collect from someone who doesn't know how the industry works or what their rights are. Anything collected over 5k is pure profit for them and so they'll use every single trick in their arsenal (some illegal/strong-arming) to try and recoup as much of the debt as they can. Lump settlements are a popular tactic. You know you owe 20k, so they come in and say they'll wipe the slate clean if you settle for 12k. You think 'Wow... 8k of debt, gone! Saviors!' and accept. That collections agency just landed 7k in profit.
But as I mentioned above, there's no way for the collections agency to really enforce any of this. Credit card debt is not secured (hence the higher interest) and their only method to truly recoup anything from you is to take you to court. Because your debt is fairly high (20k), this is a definite possibility.
What about statements? When I go back to paying monthly, will I get statements from the collection agency?
Once you arrange a repayment plan, yes, you will probably get statements from the new collections agency. Before that happens, you'll probably get various letters attempting to collect on the debt and encourage you to arrange a repayment plan or settle at a lump sum.
Finally, you'll need to contact AMEX to find out whether your debt is in their in-house collections or if it was charged-off and sold. Also, when it comes to settling: haggle. Low-ball them for settlements and insist credit report clean-up along with the deal.
posted by stubbehtail at 3:22 PM on January 16, 2015 [1 favorite]
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I would be surprised if that's the case after just "a couple months". You would know if it was sold because you will start getting bills from the company that purchased the debt.
If they sold it to a collection agency, can I negotiate with the agency?
Sure. You can always negotiate debt.
I didn't pay AMEX, so how can I pay a agency?
You send them a check and/or give them your checking information for an ACH transfer to them.
am I legally obligated to pay the $20k if they bought it for $5,000?
Yes. You always legally obligated to pay your debts. However, the collections agency may still negotiate for a lower amount in case they think you are not willing/able to pay the full amount. If they decide you are willing/able to pay the full amount, they will pursue the full amount. The debt collections agency has (more or less) the same legal right to the debt as AMEX did.
As a practical matter, no debt collections agency would survive if they always bought debt for $X and collected $X (or less) on that debt. There would be no way to make profit. Debt collections agencies buy a lot of debt at small amounts, expecting that on some of that debt, they'll collect much more payment than they paid for that debt. Correspondingly, on some debt they buy, they'll collect less than they paid for the debt.
When I go back to paying monthly, will I get statements from the collection agency?
Yes. If the debt was sold, you no longer have a relationship (regarding that debt) with AMEX.
As a practical matter, if you decide to pay the collections agency monthly, there is almost no chance the collections agency will settle for less than the full amount of the debt. In general, collections agencies believe (rightly or wrongly) that most people will not continue to pay the debt monthly to the collections agency (after all, those same people failed to do so with the original debt holder). You have the highest chance to negotiate a lower payment if you can make as much of that payment as possible up-front.
posted by saeculorum at 1:16 PM on January 16, 2015 [2 favorites]